Martin Midstream Partners - 10-Q quarterly report FY2020 Q2

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐						TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number

000-50056

MARTIN MIDSTREAM PARTNERS L.P.

(Exact name of registrant as specified in its charter)


Delaware						05-0527861
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)

4200 Stone Road

Kilgore, Texas 75662

(Address of principal executive offices, zip code)

Registrant’s telephone number, including area code: (903) 983-6200

Securities registered pursuant to Section 12(b) of the Act


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Units representing limited partnership interests	MMLP	The NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes			☒			No			☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


Yes			☒			No			☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes			☐			No			☒

The number of the registrant’s Common Units outstanding at August 7, 2020, was 38,852,507.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements included in this quarterly report that are not historical facts (including any statements concerning plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto), including, without limitation, the information set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations, are forward-looking statements. These statements can be identified by the use of forward-looking terminology including "forecast," "may," "believe," "will," "expect," "anticipate," "estimate," "continue," or other similar words. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other "forward-looking" information. We and our representatives may from time to time make other oral or written statements that are also forward-looking statements.

These forward-looking statements are made based upon management’s current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and therefore involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.

Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements for a number of important reasons, including those discussed under "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (the "SEC") on February 14, 2020, as updated and supplemented in Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020 and Part II, Item 1A of this Quarterly Report on Form 10-Q, and as may be updated and supplemented from time to time in our future Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.


			Page

PART I – FINANCIAL INFORMATION			4

Item 1. Financial Statements			4
Consolidated and Condensed Balance Sheets as of June 30 , 2020 (unaudited) and December 31, 2019 (audited)			4
Consolidated and Condensed Statements of Operations for the Three and Si x Months Ended June 30 , 2020 and 2019 (unaudited)			5
Consolidated and Condensed Statements of Capital (Deficit) for the Si x Months Ended June 30 , 2020 and 2019 (unaudited)			8
Consolidated and Condensed Statements of Cash Flows for the Six Months Ended June 30 , 2020 and 2019 (unaudited)			9
Notes to Consolidated and Condensed Financial Statements (unaudited)			10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			37

Item 3. Quantitative and Qualitative Disclosures About Market Risk			60

Item 4. Controls and Procedures			61

PART II. OTHER INFORMATION			62

Item 1. Legal Proceedings			62

Item 1A. Risk Factors			62

Item 6. Exhibits			63

PART I – FINANCIAL INFORMATION


Item 1.			Financial Statements

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED BALANCE SHEETS

(Dollars in thousands)


	June 30, 2020		December 31, 2019
	(Unaudited)		(Audited)
Assets
Cash	$	52	$	2,856
Accounts and other receivables, less allowance for doubtful accounts of $516 and $532, respectively	48,517		87,254

Inventories	65,668		62,540
Due from affiliates	18,889		17,829

Other current assets	9,605		5,833
Assets held for sale	—		5,052
Total current assets	142,731		181,364

Property, plant and equipment, at cost	899,225		884,728
Accumulated depreciation	(493,115)		(467,531)
Property, plant and equipment, net	406,110		417,197

Goodwill	17,705		17,705
Right-of-use assets	24,554		23,901
Deferred income taxes, net	22,404		23,422
Other assets, net	3,475		3,567
Total assets	$	616,979	$	667,156

Liabilities and Partners’ Capital (Deficit)
Current installments of long-term debt and finance lease obligations	$	368,150	$	6,758
Trade and other accounts payable	45,785		64,802
Product exchange payables	5,133		4,322
Due to affiliates	444		1,470
Income taxes payable	498		472
Fair value of derivatives	—		667
Other accrued liabilities	26,496		28,789
Total current liabilities	446,506		107,280

Long-term debt, net	176,794		569,788
Finance lease obligations	405		717
Operating lease liabilities	17,081		16,656


Other long-term obligations	10,000		8,911
Total liabilities	650,786		703,352

Commitments and contingencies
Partners’ capital (deficit)	(33,807)		(36,196)
Total partners’ capital (deficit)	(33,807)		(36,196)
Total liabilities and partners' capital (deficit)	$	616,979	$	667,156

See accompanying notes to consolidated and condensed financial statements.

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars and units in thousands, except per unit amounts)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Revenues:
Terminalling and storage *	$	19,908	$	21,377	$	40,382	$	44,481
Transportation *	31,485		41,321		70,426		79,116
Sulfur services	2,914		2,858		5,829		5,717
Product sales: *
Natural gas liquids	30,299		57,398		112,510		173,872
Sulfur services	30,506		32,998		55,914		61,732
Terminalling and storage	25,526		31,371		54,460		62,438
	86,331		121,767		222,884		298,042
Total revenues	140,638		187,323		339,521		427,356

Costs and expenses:
Cost of products sold: (excluding depreciation and amortization)
Natural gas liquids *	24,293		53,546		94,128		159,736
Sulfur services *	17,559		22,124		32,854		41,820
Terminalling and storage *	21,438		26,118		45,118		52,989
	63,290		101,788		172,100		254,545
Expenses:
Operating expenses *	44,202		53,579		95,484		105,428
Selling, general and administrative *	9,858		10,226		20,320		20,426


Depreciation and amortization	15,343		15,087		30,582		29,988
Total costs and expenses	132,693		180,680		318,486		410,387

Other operating income (loss), net	15		(1,633)		2,525		(2,353)
Operating income	7,960		5,010		23,560		14,616

Other income (expense):
Interest expense, net	(9,377)		(14,986)		(19,302)		(28,657)
Gain on retirement of senior unsecured notes	—		—		3,484		—

Other, net	4		1		7		4
Total other expense	(9,373)		(14,985)		(15,811)		(28,653)

Net income (loss) before taxes	(1,413)		(9,975)		7,749		(14,037)
Income tax expense	(790)		(639)		(1,137)		(1,335)
Income (loss) from continuing operations	(2,203)		(10,614)		6,612		(15,372)
Income from discontinued operations, net of income taxes	—		(180,568)		—		(179,466)
Net income (loss)	(2,203)		(191,182)		6,612		(194,838)
Less general partner's interest in net (income) loss	44		3,824		(132)		3,897

Less (income) loss allocable to unvested restricted units	10		65		(45)		67
Limited partners' interest in net income (loss)	$	(2,149)	$	(187,293)	$	6,435	$	(190,874)

See accompanying notes to consolidated and condensed financial statements.

*Related Party Transactions Shown Below

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars and units in thousands, except per unit amounts)

*Related Party Transactions Included Above


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Revenues:*
Terminalling and storage	$	15,942	$	17,477	$	31,816	$	36,449
Transportation	5,393		5,856		11,287		11,499

Product Sales	38		286		130		707
Costs and expenses:*
Cost of products sold: (excluding depreciation and amortization)

Sulfur services	2,554		2,884		5,321		5,458
Terminalling and storage	4,249		7,203		10,026		13,112
Expenses:
Operating expenses	19,440		24,407		41,211		46,943
Selling, general and administrative	8,055		8,558		16,367		17,093

See accompanying notes to consolidated and condensed financial statements.

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars and units in thousands, except per unit amounts)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Allocation of net income (loss) attributable to:
Limited partner interest:
Continuing operations	$	(2,149)	$	(10,398)	$	6,435	$	(15,060)
Discontinued operations	—		(176,895)		—		(175,814)
	$	(2,149)	$	(187,293)	$	6,435	$	(190,874)
General partner interest:
Continuing operations	$	(44)	$	(212)	$	132	$	(307)
Discontinued operations	—		(3,612)		—		(3,590)
	$	(44)	$	(3,824)	$	132	$	(3,897)

Net income (loss) per unit attributable to limited partners:
Basic:
Continuing operations	$	(0.06)	$	(0.27)	$	0.17	$	(0.39)
Discontinued operations	—		(4.55)		—		(4.52)
	$	(0.06)	$	(4.82)	$	0.17	$	(4.91)
Weighted average limited partner units - basic	38,662		38,871		38,651		38,912
Diluted:
Continuing operations	$	(0.06)	$	(0.27)	$	0.17	$	(0.39)
Discontinued operations	—		(4.55)		—		(4.52)
	$	(0.06)	$	(4.82)	$	0.17	$	(4.91)
Weighted average limited partner units - diluted	38,662		38,871		38,652		38,912

See accompanying notes to consolidated and condensed financial statements.

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF CAPITAL (DEFICIT)

(Unaudited)

(Dollars in thousands)


			Partners’ Capital (Deficit)
	Parent Net Investment		Common Limited							General Partner Amount
				Units			Amount					Total
Balances - January 1, 2019	$	23,720	39,032,237		$	258,085		$	6,627	$	288,432
Net loss	—		—		(190,941)			(3,897)		(194,838)
Issuance of common units, net	—		—		(259)			—		(259)
Issuance of restricted units	—		16,944		—			—		—
Forfeiture of restricted units	—		(154,288)		—			—		—

Cash distributions	—		—		(28,851)			(589)		(29,440)
Unit-based compensation	—		—		715			—		715
Purchase of treasury units	—		(31,504)		(392)			—		(392)
Excess purchase price over carrying value of acquired assets	—		—		(102,393)			—		(102,393)
Deferred taxes on acquired assets and liabilities	—		—		24,781			—		24,781
Contribution to parent	(23,720)		—		—			—		(23,720)
Balances - June 30, 2019	$	—	38,863,389		$	(39,255)		$	2,141	$	(37,114)

Balances - January 1, 2020	$	—	38,863,389		$	(38,342)		$	2,146	$	(36,196)
Net income	—		—		6,480			132		6,612

Issuance of restricted units	—		81,000		—			—		—
Forfeiture of restricted units	—		(84,134)		—			—		—

Cash distributions	—		—		(4,825)			(98)		(4,923)
Unit-based compensation	—		—		709			—		709



Purchase of treasury units	—		(7,748)		(9)			—		(9)
Balances - June 30, 2020	$	—	38,852,507		$	(35,987)		$	2,180	$	(33,807)

See accompanying notes to consolidated and condensed financial statements.

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


	Six Months Ended
	June 30,
	2020		2019
Cash flows from operating activities:
Net income (loss)	$	6,612	$	(194,838)
Less: Loss from discontinued operations, net of income taxes	—		179,466
Net income (loss) from continuing operations	6,612		(15,372)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	30,582		29,988
Amortization and write-off of deferred debt issuance costs	991		2,478

Amortization of premium on notes payable	(153)		(153)
Deferred income tax expense	1,018		856
Loss on sale of property, plant and equipment, net	175		2,353


Gain on retirement of senior unsecured notes	(3,484)		—
Derivative (income) loss	(1,463)		2,322
Net cash paid for commodity derivatives	796		(249)
Unit-based compensation	709		715
Change in current assets and liabilities, excluding effects of acquisitions and dispositions:
Accounts and other receivables	37,180		28,073
Product exchange receivables	—		59
Inventories	(3,128)		3,044
Due from affiliates	(1,060)		(15,947)
Other current assets	(5,547)		(3,061)
Trade and other accounts payable	(16,502)		(2,800)
Product exchange payables	811		(4,386)
Due to affiliates	(1,026)		428
Income taxes payable	26		131
Other accrued liabilities	(2,452)		(3,043)
Change in other non-current assets and liabilities	541		(693)
Net cash provided by continuing operating activities	44,626		24,743
Net cash provided by discontinued operating activities	—		7,770
Net cash provided by operating activities	44,626		32,513

Cash flows from investing activities:
Payments for property, plant and equipment	(19,053)		(14,102)
Acquisitions	—		(23,720)
Payments for plant turnaround costs	(231)		(4,742)
Proceeds from involuntary conversion of property, plant and equipment	1,768		—
Proceeds from sale of property, plant and equipment	4,369		659
Net cash used in continuing investing activities	(13,147)		(41,905)
Net cash provided by discontinued investing activities	—		209,155
Net cash provided by (used in) investing activities	(13,147)		167,250

Cash flows from financing activities:
Payments of long-term debt and finance lease obligations	(160,082)		(362,672)
Proceeds from long-term debt	131,000		298,000
Proceeds from issuance of common units, net of issuance related costs	—		(259)

Purchase of treasury units	(9)		(392)

Payment of debt issuance costs	(269)		(386)
Excess purchase price over carrying value of acquired assets	—		(102,393)
Cash distributions paid	(4,923)		(29,440)
Net cash used in financing activities	(34,283)		(197,542)

Net increase (decrease) in cash	(2,804)		2,221
Cash at beginning of period	2,856		300
Cash at end of period	$	52	$	2,521
Non-cash additions to property, plant and equipment	$	1,276	$	2,248

See accompanying notes to consolidated and condensed financial statements.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Martin Midstream Partners L.P. (the "Partnership") is a publicly traded limited partnership with a diverse set of operations focused primarily in the United States ("U.S.") Gulf Coast region. Its four primary business lines include: terminalling, processing, storage and packaging services for petroleum products and by-products including the refining of naphthenic crude oil; land and marine transportation services for petroleum products and by-products, chemicals, and specialty products; sulfur and sulfur-based products processing, manufacturing, marketing and distribution; and natural gas liquids marketing, distribution, and transportation services.

The Partnership’s unaudited consolidated and condensed financial statements have been prepared in accordance with the requirements of Form 10-Q and U.S. Generally Accepted Accounting Principles ("U.S. GAAP") for interim financial reporting. Accordingly, these financial statements have been condensed and do not include all of the information and footnotes required by U.S. GAAP for annual audited financial statements of the type contained in the Partnership’s annual reports on Form 10-K. In the opinion of the management of the Partnership’s general partner, all adjustments and elimination of significant intercompany balances necessary for a fair presentation of the Partnership’s financial position, results of operations, and cash flows for the periods shown have been made. All such adjustments are of a normal recurring nature. Results for such interim periods are not necessarily indicative of the results of operations for the full year. These financial statements should be read in conjunction with the Partnership’s audited consolidated financial statements and notes thereto included in the Partnership’s annual report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (the "SEC") on February 14, 2020.

Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated and condensed financial statements in conformity with U.S. GAAP. Actual results could differ from those estimates.

Restructuring Support Agreement. On June 25, 2020, the Partnership entered into a restructuring support agreement (as amended on July 7, 2020, the "Restructuring Support Agreement") with certain holders (the "Supporting Holders") that beneficially own, as of July 24, 2020, over 74% in principal amount of the Partnership’s 7.25% senior unsecured notes due 2021 (the "2021 Notes"), pursuant to which such holders and the Partnership agreed to enter into and implement a proposed debt restructuring transaction through an exchange offer with respect to the 2021 Notes (the "Exchange Offer") and a cash tender offer (the "Cash Tender Offer").

The Restructuring Support Agreement contemplates the following transactions:

•The Partnership agreed to commence the Exchange Offer to exchange the 2021 Notes, held by eligible holders of record, for either of:

(1)$650 in cash for each $1,000 in principal amount of 2021 Notes tendered (together with the Cash Tender Offer, the "Cash Offers"),

(2)$1,000 in principal amount of 11.50% senior secured second lien notes due 2025 (the "Exchange Notes") for each $1,000 in principal amount of 2021 Notes tendered, and

(3)

(a)The right to acquire such holder’s pro rata share of $50 million of 10.00% senior secured 1.5 lien notes due 2024 (the "New Notes", and the offer of the right to acquire such New Notes, the "Rights Offering"), the proceeds of which will be used to fund the Cash Offers;

(b)Holders that participate in the Rights Offering will receive Unused Proceeds (as described below) on a pro rata basis based on the principal amount of 2021 Notes participating in the Rights Offering, and $1,000 in principal amount of Exchange Notes for each $1,000 in principal amount of such holder’s 2021 Notes remaining after application of an amount (the "Unused Proceeds") equal to (i) the difference between $50 million and the amount of cash actually used in the Cash Offers multiplied by (ii) 0.85.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

•In connection with the Exchange Offer, the Partnership agreed to (x) commence a consent solicitation to make certain proposed amendments to the terms of the indenture governing the 2021 Notes to (i) eliminate substantially all of the restrictive covenants in the indenture governing the 2021 Notes, (ii) delete certain events of default and (iii) reduce the required time period for the Partnership to deliver a notice of redemption from at least 30 days before a redemption date to at least three business days before a redemption date and (y) solicit votes to accept the Plan, as further described below.

•The Partnership also agreed to commence a Cash Tender Offer to purchase 2021 Notes for $650 in cash for each $1,000 in principal amount of 2021 Notes tendered, to the extent held by holders of record not eligible to participate in the Exchange Offer. In connection with the Cash Tender Offer, the Partnership also agreed to commence a consent solicitation to make certain proposed amendments to the terms of the indenture governing the 2021 Notes, as described above.

•Each Supporting Holder agreed to tender its 2021 Notes pursuant to the terms of the Exchange Offer and to deliver corresponding consents.

The Restructuring Support Agreement contemplates various closing conditions, including, among other things, the negotiation of definitive documentation and a minimum tender condition (the "Minimum Participation Condition"), as described below. If the Exchange Offer and Cash Tender Offer are unsuccessful, the Restructuring Support Agreement provides agreed-upon terms for a pre-packaged financial restructuring plan (the "Plan") to be filed in cases commenced under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code" and such cases, the "Chapter 11 Cases"), subject to the terms and conditions of the Restructuring Support Agreement, including in the term sheet and the Plan attached thereto.

As of 5:00 p.m., New York City time, on July 23, 2020 (the “Early Participation Date”), the Partnership received tenders of approximately $335.5 million aggregate principal amount of the 2021 Notes in the Exchange Offer and Cash Tender Offer, which represented approximately 92.045% in principal amount of the 2021 Notes. On July 31, 2020, the required amount of Supporting Holders and the Partnership entered into an amendment to the Restructuring Support Agreement that, among other things, reduced the Minimum Participation Condition from 95% to 92% in principal amount of 2021 Notes tendered. As a result, the Minimum Participation Condition has been satisfied and, subject to satisfaction of other customary closing conditions, the Exchange offer and Cash Tender Offer will be consummated on or about August 12, 2020 and the Plan will not be filed.

The Supporting Holders may terminate the Restructuring Support Agreement if, among other customary termination events, the Partnership files for bankruptcy other than as contemplated by the Restructuring Support Agreement.

The Partnership expects to continue the operation of its business in the ordinary course and does not anticipate interruption in its operations during the restructuring regardless of whether the Partnership conducts its restructuring in or out of the chapter 11 process. The transactions contemplated by the Restructuring Support Agreement are not intended to impact trade vendors, employees, customers, or any related contractual agreements or obligations. The Partnership’s common units will remain outstanding and are not a part of the transactions contemplated by the Restructuring Support Agreement.

See Note 18, "Subsequent Events" for further discussion of the Exchange Offer and the related transactions that are being conducted pursuant to the Restructuring Support Agreement.

Divestiture of Natural Gas Storage Assets. On June 28, 2019, the Partnership completed the sale of its membership interests in Arcadia Gas Storage, LLC, Cadeville Gas Storage LLC, Monroe Gas Storage Company, LLC and Perryville Gas Storage LLC (the "Natural Gas Storage Assets") to Hartree Cardinal Gas, LLC ("Hartree"), a subsidiary of Hartree Bulk Storage, LLC. The Natural Gas Storage Assets consist of approximately 50 billion cubic feet of working capacity located in northern Louisiana and Mississippi. In consideration of the sale of the Natural Gas Storage Assets, the Partnership received cash proceeds of $210,067 after transaction fees and expenses. The net proceeds were used to reduce outstanding borrowings under the Partnership's revolving credit facility. The Partnership concluded the disposition represented a strategic shift which had a major effect on its financial results going forward. As a result, the Partnership has presented the results of operations and

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

cash flows relating to the Natural Gas Storage Assets as discontinued operations for the three and six months ended June 30, 2019. See Note 3 for more information.

Impact of COVID-19 Pandemic. A novel strain of coronavirus ("COVID-19") surfaced in late 2019 and has spread around the world, including to the United States. In March 2020, the World Health Organization declared COVID-19 a pandemic. Due to the economic impacts of the COVID-19 pandemic, the markets have experienced a decline in oil prices in response to oil demand concerns. These concerns were further exacerbated by the price war among members of the Organization of Petroleum Exporting Countries ("OPEC") and other non-OPEC producer nations during the first quarter of 2020 and global storage considerations. Travel restrictions and stay-at-home orders implemented by governments in many regions and countries across the globe, including the United States, have greatly impacted the demand for refined products resulting in a significant reduction in refinery utilization.

The COVID-19 pandemic has impacted the Partnership's 2020 performance to date, and the Partnership expects to continue to experience the impacts of COVID-19 throughout the remainder of 2020 as a result of continued reduction in refined product demand across the industries the Partnership serves. The extent to which the duration and severity of the pandemic impacts our business, results of operations, and financial condition, will depend on future developments, which are highly uncertain and cannot be predicted at this time. Accordingly, it is possible that the impact of the COVID-19 pandemic could have a material adverse effect on the Partnership's results of operations, financial position and cash flows for the year ended December 31, 2020, including the recoverability of long-lived assets and goodwill, the valuation of inventory, and the amount of expected credit losses.

Management considered the impact of the COVID-19 pandemic on the assumptions and estimates used in the preparation of the financial statements. Management identified triggering events requiring the performance of impairment testing of long-lived assets and goodwill related to both the performance of the Partnership's unit price during the first quarter of 2020 and certain of the Partnership's businesses that are sensitive to reductions in refined product demand and refinery utilization. As a result, the Partnership recorded impairment charges totaling $4,352 related to long-lived assets during the first quarter of 2020. See Note 3 for more information. No impairments were identified related to goodwill. A sustained reduction in refinery demand and utilization could lead to future asset impairments as well as adversely affect access to capital and financing to be able to meet future obligations. Management also assessed the extent to which the current macroeconomic events brought about by COVID-19 and significant declines in refined product demand impacted the valuation of expected credit losses on accounts receivable and certain inventory items or resulted in modifications to any significant contracts. Ultimately the results of these assessments did not have a material impact on the Partnership's results as of June 30, 2020.

NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS

During the first quarter of 2020, the Partnership adopted Accounting Standards Update ("ASU") 2016-13, "Financial Instruments - Credit Losses," which required the Partnership to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaced the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables. Adoption of the new standard did not have a material impact on the Partnership’s consolidated financial statements.

NOTE 3. DIVESTITURES AND DISCONTINUED OPERATIONS

Divestiture of Natural Gas Storage Assets. On June 28, 2019, the Partnership completed the sale of the Natural Gas Storage Assets to Hartree, a subsidiary of Hartree Bulk Storage, LLC. The Natural Gas Storage Assets consist of approximately 50 billion cubic feet of working capacity located in northern Louisiana and Mississippi. In consideration of the sale of these assets, the Partnership received cash proceeds of $210,067 after transaction fees and expenses. The net proceeds were used to reduce outstanding borrowings under the Partnership's revolving credit facility. The Partnership has concluded the disposition represents a strategic shift and will have a major effect on its financial results going forward. As a result, the Partnership has presented the results of operations and cash flows relating to the Natural Gas Storage Assets as discontinued operations for the three and six months ended June 30, 2019.

The operating results, which are included in income from discontinued operations, were as follows:

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)


	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019

Total revenues	$	11,902	$	22,836
Total costs and expenses and other, net, excluding depreciation and amortization	(9,609)		(15,360)
Depreciation and amortization	(4,080)		(8,161)
Other operating loss¹	(178,781)		(178,781)
Loss from discontinued operations before income taxes	(180,568)		(179,466)
Income tax expense	—		—
Loss from discontinued operations, net of income taxes	$	(180,568)	$	(179,466)

¹ The three and six months ended June 30, 2019 includes a loss on the disposition of the Natural Gas Storage Assets of $178,781.

Long-Lived Assets Held for Sale

At December 31, 2019, certain terminalling and storage and transportation assets met the criteria to be classified as held for sale in accordance with ASC 360-10 and are presented at the lower of the assets' carrying amount or fair value less cost to sell by segment in current assets in the table below. These assets are considered non-core assets to the Partnership's operations and did not qualify for discontinued operations presentation under the guidance of ASC 205-20.


	June 30, 2020		December 31, 2019

Terminalling and storage	$	—	$	3,552
Transportation	—		1,500
Assets held for sale	$	—	$	5,052

In the first quarter of 2020, the Partnership identified a triggering event related to a decline in the fair value related to the assets classified as held for sale at December 31, 2019. As a result, an impairment charge of $3,052 and $1,300 was recorded in the Terminalling and Storage and Transportation segments, respectively, during the three months ended March 31, of 2020 and was recorded in "Other operating income (loss)" in the Partnership's Consolidated and Condensed Statements of Operations. At June 30, 2020, the remaining assets previously classified as held for sale in the amount of $700 no longer met the criteria to be classified as held for sale in accordance with ASC 360-10.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

NOTE 4. REVENUE

The following table disaggregates our revenue by major source:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Terminalling and storage segment
Lubricant product sales	$	25,526	$	31,371	$	54,460	$	62,438
Throughput and storage	19,908		21,377		40,382		44,481
	$	45,434	$	52,748	$	94,842	$	106,919
Natural gas liquids segment
Natural gas liquids product sales	$	30,299	$	57,398	$	112,510	$	173,872
	$	30,299	$	57,398	$	112,510	$	173,872
Sulfur services segment
Sulfur product sales	$	6,367	$	8,204	$	12,849	$	18,156
Fertilizer product sales	24,139		24,794		43,065		43,576
Sulfur services	2,914		2,858		5,829		5,717
	$	33,420	$	35,856	$	61,743	$	67,449
Transportation segment
Land transportation	$	19,873	$	25,497	$	44,107	$	49,616
Inland transportation	10,611		14,188		24,317		26,665
Offshore transportation	1,001		1,636		2,002		2,835
	$	31,485	$	41,321	$	70,426	$	79,116

Revenue is measured based on a consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties where the Partnership is acting as an agent. The Partnership recognizes revenue when the Partnership satisfies a performance obligation, which typically occurs when the Partnership transfers control over a product to a customer or as the Partnership delivers a service.

The following is a description of the principal activities - separated by reportable segments - from which the Partnership generates revenue.

Terminalling and Storage Segment

Revenue is recognized for storage contracts based on the contracted monthly tank fixed fee. For throughput contracts, revenue is recognized based on the volume moved through the Partnership’s terminals at the contracted rate. For the Partnership’s tolling agreement, revenue is recognized based on the contracted monthly reservation fee and throughput volumes moved through the facility. When lubricants and drilling fluids are sold by truck or rail, revenue is recognized when title is transferred, which is either upon delivering product to the customer or when the product leaves the Partnership's facility, depending on the specific terms of the contract. Delivery of product is invoiced as the transaction occurs and is generally paid within a month. Throughput and storage revenue in the table above includes non-cancelable revenue arrangements that are under the scope of ASC 842, whereby the Partnership has committed certain Terminalling and Storage assets in exchange for a minimum fee.

Natural Gas Liquids Segment

Natural Gas Liquids ("NGL") distribution revenue is recognized when product is delivered by truck, rail, or pipeline to the Partnership's NGL customers. Revenue is recognized on title transfer of the product to the customer. Delivery of product is invoiced as the transaction occurs and is generally paid within a month.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

Sulfur Services Segment

Revenue from sulfur and fertilizer product sales is recognized when the customer takes title to the product. Delivery of product is invoiced as the transaction occurs and is generally paid within a month. Revenue from sulfur services is recognized as services are performed during each monthly period. The performance of the service is invoiced as the transaction occurs and is generally paid within a month.

Transportation Segment

Revenue related to land transportation is recognized for line hauls based on a mileage rate. For contracted trips, revenue is recognized upon completion of the particular trip. The performance of the service is invoiced as the transaction occurs and is generally paid within a month.

Revenue related to marine transportation is recognized for time charters based on a per day rate. For contracted trips, revenue is recognized upon completion of the particular trip. The performance of the service is invoiced as the transaction occurs and is generally paid within a month.

The table includes estimated minimum revenue expected to be recognized in the future related to performance obligations that are unsatisfied at the end of the reporting period. The Partnership applies the practical expedient in ASC 606-10-50-14(a) and does not disclose information about remaining performance obligations that have original expected durations of one year or less.


	2020		2021		2022		2023		2024		Thereafter		Total
Terminalling and storage
Throughput and storage	$	23,123	$	43,273	$	40,394	$	41,605	$	42,854	$	338,339	$	529,588
Sulfur services
Sulfur product sales	12,980		17,025		14,879		13,834		975		975		60,668
Total	$	36,103	$	60,298	$	55,273	$	55,439	$	43,829	$	339,314	$	590,256

NOTE 5. INVENTORIES

Components of inventories at June 30, 2020 and December 31, 2019 were as follows:


	June 30, 2020		December 31, 2019
Natural gas liquids	$	26,783	$	19,097
Sulfur	5,257		4,586
Fertilizer	11,478		15,852
Lubricants	18,209		18,925
Other	3,941		4,080
	$	65,668	$	62,540

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

NOTE 6. DEBT

At June 30, 2020 and December 31, 2019, long-term debt consisted of the following:


	June 30, 2020		December 31, 2019
$400,000 Revolving credit facility at variable interest rate (3.44%¹ weighted average at June 30, 2020), due August 2023⁴secured by substantially all of the Partnership’s assets, including, without limitation, inventory, accounts receivable, vessels, equipment, fixed assets and the interests in the Partnership’s operating subsidiaries, net of unamortized debt issuance costs of $4,206 and $4,586, respectively²	$	176,794	$	196,414
$400,000 Senior notes, 7.25% interest, net of unamortized debt issuance costs of $428 and $770, respectively, including unamortized premium of $191 and $344, respectively, issued $250,000 February 2013 and $150,000 April 2014, $26,200 repurchased during 2015, $9,344 repurchased during 2020, due February 2021, unsecured ^2,3,4,5	364,219		373,374
Total	541,013		569,788
Less: current portion	(364,219)		—
Total long-term debt, net of current portion	$	176,794	$	569,788

Current installments of finance lease obligations	$	3,931	$	6,758
Finance lease obligations	405		717
Total finance lease obligations	$	4,336	$	7,475

¹ Interest rate fluctuates based on the LIBOR rate plus an applicable margin set on the date of each advance. The margin above LIBOR is set every three months. Indebtedness under the credit facility bears interest at LIBOR plus an applicable margin or the base prime rate plus an applicable margin. All amounts outstanding at June 30, 2020 and December 31, 2019 were at LIBOR plus an applicable margin. The applicable margin for revolving loans that are LIBOR loans currently ranges from 2.25% to 3.50% and the applicable margin for revolving loans that are base prime rate loans currently ranges from 1.25% to 2.50%. The applicable margin for existing LIBOR borrowings at June 30, 2020 is 3.25%. The credit facility contains various covenants which limit the Partnership’s ability to make distributions; make certain investments and acquisitions; enter into certain agreements; incur indebtedness; sell assets; and make certain amendments to the Partnership's omnibus agreement with Martin Resource Management Corporation (the "Omnibus Agreement"). Upon the earlier of (i) the closing of the Exchange Offer and related transactions and (ii) August 15, 2020, the applicable margin for revolving loans that are LIBOR loans will range from 2.75% to 4.00% and the applicable margin for revolving loans that are base prime rate loans will range from 1.75% to 3.00%. Starting on such date, LIBOR will have a floor of 1.0% per annum.

² The Partnership is in compliance with all debt covenants as of June 30, 2020 and December 31, 2019, respectively.

³The 2021 indenture restricts the Partnership’s ability to sell assets; pay distributions or repurchase units or redeem or repurchase subordinated debt; make investments; incur or guarantee additional indebtedness or issue preferred units; and consolidate, merge or transfer all or substantially all of its assets.

⁴As of June 30, 2020, the 2021 Notes were due within twelve months and have therefore been presented as a current liability on the Consolidated and Condensed Balance Sheets at June 30, 2020. The Partnership's amended revolving credit facility includes a provision that accelerates the August 31, 2023 maturity date of the revolving credit facility to (i) August 19, 2020 if either (x) more than $36.5 million of the 2021 Notes remain outstanding after completion of the Exchange Offer or (y) the Exchange Offer has not been completed by August 15, 2020 and the Partnership has not commenced the chapter 11 proceedings contemplated by the Plan prior to August 19, 2020 or (ii) October 16, 2020 if the Partnership commences such chapter 11 proceedings and the Plan is not effective by October 16, 2020.

On July 8, 2020, the Partnership amended its revolving credit facility to, among other things, permit the Exchange Offer. Certain of the amendments to the revolving credit facility became effective immediately, such as a modification to its maturity date to facilitate either the Exchange Offer or the Plan. Other amendments to the revolving credit facility will become effective upon the completion of the Exchange Offer and related transactions, or on August 15, 2020 if the Exchange Offer and

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

such related transactions have not closed by such date. The subsequent amendments to the Partnership’s revolving credit facility include, among other things, a reduction of the aggregate revolving commitments thereunder from $400 million to $300 million and an increase in the pricing under the revolving credit facility.

On July 9, 2020, the Partnership commenced the Exchange Offer and related transactions and offers contemplated by the Restructuring Support Agreement. As of the Early Participation Date, the Partnership received sufficient 2021 Notes tendered such that the Minimum Participation Condition has been satisfied and, subject to satisfaction of other customary closing conditions, the Exchange offer and Cash Tender Offer will be consummated on or about August 12, 2020 and the Plan will not be filed. In addition, the Partnership received the requisite majority consent necessary for the adoption of the proposed amendments to the indenture governing the 2021 Notes (the “2021 Notes Indenture”), which will, among other things, eliminate substantially all of the restrictive covenants in the 2021 Notes Indenture, delete certain events of default, and shorten the period of advance notice required to be given to holders of 2021 Notes from 30 days to three business days in the case of a redemption of the 2021 Notes. See Note 18, "Subsequent Events" for further discussion of the Exchange Offer and related transactions.

If we are unable to refinance the 2021 Notes either via the Exchange Offer or the Plan, in each case as contemplated by the Restructuring Support Agreement, we would be in default under our revolving credit facility. An event of default under our revolving credit facility would allow the lenders to declare the balance outstanding thereunder due and payable in full, which could trigger cross-defaults under other agreements, which could also result in the acceleration of those obligations by the counterparties to those agreements.

Pending the successful implementation of the refinancing of the 2021 Notes, the conditions described above have raised substantial doubt about the Partnership’s ability to continue as a going concern. The Partnership’s management is engaged in ongoing communication with credit providers and presently believes the measures being taken will enable the Partnership to successfully refinance the 2021 Notes and comply with covenants under its revolving credit facility, although no assurance can be given.

⁵ In March 2020, the Partnership repurchased on the open market an aggregate $9,344 of the 2021 Notes, resulting in a gain on retirement of $3,484.

The Partnership paid cash interest, net of capitalized interest, in the amount of $2,376 and $7,330 for the three months ended June 30, 2020 and 2019, respectively. The Partnership paid cash interest, net of capitalized interest, in the amount of $19,113 and $26,693 for the six months ended June 30, 2020 and 2019, respectively. Capitalized interest was $6 and $0 for the three months ended June 30, 2020 and 2019, respectively. Capitalized interest was $9 and $2 for the six months ended June 30, 2020 and 2019, respectively.

NOTE 7. LEASES

The Partnership has numerous operating leases primarily for terminal facilities and transportation and other equipment. The leases generally provide that all expenses related to the equipment are to be paid by the lessee.

Operating lease Right-of-Use ("ROU") assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of the Partnership's leases do not provide an implicit rate of return, the Partnership uses its imputed collateralized rate based on the information available at commencement date in determining the present value of lease payments. The estimated rate is based on a risk-free rate plus a risk-adjusted margin.

Our leases have remaining lease terms of 1 year to 17 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year. The Partnership includes extension periods and excludes termination periods from its lease term if, at commencement, it is reasonably likely that the Partnership will exercise the option.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

The components of lease expense for the six months ended June 30, 2020 and 2019 were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Operating lease cost	$	2,767	$	2,784	$	5,611	$	5,381
Finance lease cost:
Amortization of right-of-use assets	$	526	688		$	1,115	1,310
Interest on lease liabilities	$	86	185		$	196	368
Short-term lease cost	$	3,492	2,671		$	6,915	5,222
Variable lease cost	$	22	$	22	$	50	$	50
Total lease cost	$	6,893	$	6,350	$	13,887	$	12,331

Supplemental balance sheet information related to leases at June 30, 2020 and December 31, 2019 was as follows:


	June 30, 2020		December 31, 2019
Operating Leases
Operating lease right-of-use assets	$	24,554	$	23,901

Current portion of operating lease liabilities included in "Other accrued liabilities"	$	7,906	$	7,722
Operating lease liabilities	$	17,081	16,656
Total operating lease liabilities	$	24,987	$	24,378

Finance Leases
Property, plant and equipment, at cost	$	11,107	$	15,367
Accumulated depreciation	$	(3,360)	(3,941)
Property, plant and equipment, net	$	7,747	$	11,426

Current installments of finance lease obligations	$	3,931	$	6,758
Finance lease obligations	$	405	717
Total finance lease obligations	$	4,336	$	7,475

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

The Partnership’s future minimum lease obligations as of June 30, 2020 consist of the following:


	Operating Leases		Finance Leases
Year 1	$	8,964	$	4,044
Year 2	6,731		252
Year 3	4,055		172
Year 4	1,887		—
Year 5	1,210		—
Thereafter	6,319		—
Total	$	29,166	$	4,468
Less amounts representing interest costs	(4,179)		(132)
Total lease liability	$	24,987	$	4,336

The Partnership has non-cancelable revenue arrangements that are under the scope of ASC 842 whereby we have committed certain terminalling and storage assets in exchange for a minimum fee. Future minimum revenues the Partnership expects to receive under these non-cancelable arrangements as of June 30, 2020 are as follows: 2020 - $9,960; 2021 - $14,019; 2022 - $13,004; 2023 - $12,609; 2024 - $12,609; subsequent years - $49,414.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

NOTE 8. SUPPLEMENTAL BALANCE SHEET INFORMATION

Components of "Other accrued liabilities" were as follows:


	June 30, 2020		December 31, 2019
Accrued interest	$	10,121	$	10,761
Asset retirement obligations	—		25
Property and other taxes payable	4,305		5,411
Accrued payroll	2,749		3,011
Operating lease liabilities	7,906		7,722
Other	1,415		1,859
	$	26,496	$	28,789

The schedule below summarizes the changes in our asset retirement obligations:


	June 30, 2020

Beginning asset retirement obligations	$	8,936

Additions to asset retirement obligations	379
Accretion expense	206
Liabilities settled	(510)
Ending asset retirement obligations	9,011
Current portion of asset retirement obligations¹	—
Long-term portion of asset retirement obligations²	$	9,011

¹The current portion of asset retirement obligations is included in "Other accrued liabilities" on the Partnership's Consolidated and Condensed Balance Sheets.

²The non-current portion of asset retirement obligations is included in "Other long-term obligations" on the Partnership's Consolidated and Condensed Balance Sheets.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

NOTE 9. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Partnership’s revenues and cost of products sold are materially impacted by changes in commodity prices. Additionally, the Partnership's results of operations are materially impacted by changes in interest rates. In an effort to manage its exposure to these risks, the Partnership periodically enters into various derivative instruments, including commodity and interest rate hedges. All derivatives and hedging instruments are non-hedge derivatives and are included on the balance sheet as an asset or a liability measured at fair value and changes in fair value are recognized as gains and losses in earnings of the periods in which they occur.

(a) Commodity Derivative Instruments

The Partnership from time to time has used derivatives to manage the risk of commodity price fluctuation. Commodity risk is the adverse effect on the value of a liability or future purchase that results from a change in commodity price. The Partnership monitors and manages the commodity market risk associated with potential commodity risk exposure. In addition, the Partnership has focused on utilizing counterparties for these transactions whose financial condition is appropriate for the credit risk involved in each specific transaction. These hedging arrangements are in the form of swaps for NGLs. At June 30, 2020, the Partnership has instruments totaling a gross notional quantity of 0 barrels. At December 31, 2019, the Partnership had instruments totaling a gross notional quantity of 452,000 barrels settling during the period from January 31, 2020 through February 29, 2020. These instruments settle against the applicable pricing source for each grade and location.

(b) Interest Rate Derivative Instruments

The Partnership is exposed to market risks associated with interest rates. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. We minimize this market risk by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. From time to time, the Partnership enters into interest rate swaps to manage interest rate risk associated with the Partnership’s variable rate credit facility and its 2021 Notes. At June 30, 2020 and December 31, 2019, the Partnership did not have any outstanding interest rate derivative instruments.

For information regarding gains and losses on interest rate derivative instruments, see "Tabular Presentation of Gains and Losses on Derivative Instruments" below.

The following table summarizes the fair value and classification of the Partnership’s derivative instruments in its Consolidated and Condensed Balance Sheets:


	Fair Values of Derivative Instruments in the Consolidated and Condensed Balance Sheets
	Derivative Assets								Derivative Liabilities
		Fair Values							Fair Values
	Balance Sheet Location	June 30, 2020		December 31, 2019		Balance Sheet Location	June 30, 2020		December 31, 2019
Derivatives not designated as hedging instruments:	Current:
Commodity contracts	Fair value of derivatives	$	—	$	—	Fair value of derivatives	$	—	$	667
Total derivatives not designated as hedging instruments		$	—	$	—		$	—	$	667

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

Effect of Derivative Instruments on the Consolidated and Condensed Statements of Operations

For the Three Months Ended June 30, 2020 and 2019


	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives
		2020				2019
Derivatives not designated as hedging instruments:
Commodity contracts	Cost of products sold	$	(162)			$	(2,083)
Total effect of derivatives not designated as hedging instruments				$	(162)			$	(2,083)

Effect of Derivative Instruments on the Consolidated and Condensed Statements of Operations

For the Six Months Ended June 30, 2020 and 2019


	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives
		2020				2019
Derivatives not designated as hedging instruments:
Commodity contracts	Cost of products sold	$	(129)			$	(2,322)
Total effect of derivatives not designated as hedging instruments				$	(129)			$	(2,322)

NOTE 10. PARTNERS' CAPITAL

As of June 30, 2020, Partners’ capital consisted of 38,852,507 common limited partner units, representing a 98% partnership interest, and a 2% general partner interest. Martin Resource Management Corporation, through subsidiaries, owns 6,114,532 of the Partnership's common limited partner units representing approximately 15.7% of the Partnership's outstanding common limited partner units. Martin Midstream GP LLC ("MMGP"), the Partnership's general partner, owns the 2% general partnership interest. Martin Resource Management Corporation controls the Partnership's general partner, by virtue of its 51% voting interest in MMGP Holdings, LLC ("Holdings"), the sole member of the Partnership's general partner.

The partnership agreement of the Partnership (the "Partnership Agreement") contains specific provisions for the allocation of net income and losses to each of the partners for purposes of maintaining their respective partner capital accounts.

Incentive Distribution Rights

MMGP holds a 2% general partner interest and certain incentive distribution rights ("IDRs") in the Partnership. IDRs are a separate class of non-voting limited partner interest that may be transferred or sold by the general partner under the terms of the Partnership Agreement, and represent the right to receive an increasing percentage of cash distributions after the minimum quarterly distribution and any cumulative arrearages on common units once certain target distribution levels have been achieved. The Partnership is required to distribute all of its available cash from operating surplus, as defined in the Partnership Agreement. The general partner was allocated no incentive distributions during the six months ended June 30, 2020 and 2019.

The target distribution levels entitle the general partner to receive 2% of quarterly cash distributions from the minimum of $0.50 per unit up to $0.55 per unit, 15% of quarterly cash distributions in excess of $0.55 per unit until all unitholders have received $0.625 per unit, 25% of quarterly cash distributions in excess of $0.625 per unit until all unitholders have received $0.75 per unit and 50% of quarterly cash distributions in excess of $0.75 per unit.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

Distributions of Available Cash

The Partnership distributes all of its available cash (as defined in the Partnership Agreement) within 45 days after the end of each quarter to unitholders of record and to the general partner. Available cash is generally defined as all cash and cash equivalents of the Partnership on hand at the end of each quarter less the amount of cash reserves its general partner determines in its reasonable discretion is necessary or appropriate to: (i) provide for the proper conduct of the Partnership’s business; (ii) comply with applicable law, any debt instruments or other agreements; or (iii) provide funds for distributions to unitholders and the general partner for any one or more of the next four quarters, plus all cash on the date of determination of available cash for the quarter resulting from working capital borrowings made after the end of the quarter.

Net Income per Unit

The Partnership follows the provisions of the FASB ASC 260-10 related to earnings per share, which addresses the application of the two-class method in determining income per unit for master limited partnerships having multiple classes of securities that may participate in partnership distributions accounted for as equity distributions. Undistributed earnings are allocated to the general partner and limited partners utilizing the contractual terms of the Partnership Agreement. Distributions to the general partner pursuant to the IDRs are limited to available cash that will be distributed as defined in the Partnership Agreement. Accordingly, the Partnership does not allocate undistributed earnings to the general partner for the IDRs because the general partner's share of available cash is the maximum amount that the general partner would be contractually entitled to receive if all earnings for the period were distributed. When current period distributions are in excess of earnings, the excess distributions for the period are to be allocated to the general partner and limited partners based on their respective sharing of income and losses specified in the Partnership Agreement. Additionally, as required under FASB ASC 260-10-45-61A, unvested share-based payments that entitle employees to receive non-forfeitable distributions are considered participating securities, as defined in FASB ASC 260-10-20, for earnings per unit calculations.

For purposes of computing diluted net income per unit, the Partnership uses the more dilutive of the two-class and if-converted methods. Under the if-converted method, the weighted-average number of subordinated units outstanding for the period is added to the weighted-average number of common units outstanding for purposes of computing basic net income per unit and the resulting amount is compared to the diluted net income per unit computed using the two-class method. The following is a reconciliation of net income from continuing operations and net income from discontinued operations allocated to the general partner and limited partners for purposes of calculating net income attributable to limited partners per unit:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Continuing operations:
Income (loss) from continuing operations	$	(2,203)	$	(10,614)	$	6,612	$	(15,372)

Less general partner’s interest in net income (loss):

Distributions payable on behalf of general partner interest	4		11		53		31
General partner interest in undistributed income (loss)	(48)		(223)		79		(338)
Less income (loss) allocable to unvested restricted units	(10)		(4)		45		(5)
Limited partners’ interest in net income (loss)	$	(2,149)	$	(10,398)	$	6,435	$	(15,060)

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Discontinued operations:
Income from discontinued operations	$	—	$	(180,568)	$	—	$	(179,466)
Less general partner’s interest in net income (loss):
Distributions payable on behalf of IDRs	—		—		—		—
Distributions payable on behalf of general partner interest	—		185		—		362
General partner interest in undistributed income	—		(3,797)		—		(3,952)
Less income allocable to unvested restricted units	—		(61)		—		(62)
Limited partners’ interest in net income	$	—	$	(176,895)	$	—	$	(175,814)

The Partnership allocates the general partner's share of earnings between continuing and discontinued operations as a proportion of net income from continuing and discontinued operations to total net income.

The following are the unit amounts used to compute the basic and diluted earnings per limited partner unit for the periods presented:


	Three Months Ended June 30,			Six Months Ended June 30,
	2020	2019	2020	2019
Basic weighted average limited partner units outstanding	38,661,852	38,871,420	38,651,357	38,912,250
Dilutive effect of restricted units issued	—	—	540	—
Total weighted average limited partner diluted units outstanding	38,661,852	38,871,420	38,651,897	38,912,250

All outstanding units were included in the computation of diluted earnings per unit and weighted based on the number of days such units were outstanding during the periods presented. All common unit equivalents were antidilutive for the three and six months ended June 30, 2019 and the three months ended June 30, 2020 because the limited partners were allocated a net loss in this period.

NOTE 11. UNIT BASED AWARDS

The Partnership recognizes compensation cost related to unit-based awards to both employees and non-employees in its consolidated and condensed financial statements in accordance with certain provisions of ASC 718. Amounts recognized in selling, general, and administrative expense in the consolidated and condensed financial statements with respect to these plans are as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Employees	$	301	$	300	$	602	$	629
Non-employee directors	62		63		107		86
Total unit-based compensation expense	$	363	$	363	$	709	$	715

All of the Partnership's outstanding awards at June 30, 2020 met the criteria to be treated under equity classification.

Long-Term Incentive Plans

The Partnership's general partner has a long-term incentive plan for employees and directors of the general partner and its affiliates who perform services for the Partnership.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

On May 26, 2017, the unitholders of the Partnership approved the Martin Midstream Partners L.P. 2017 Restricted Unit Plan (the "2017 LTIP"). The plan currently permits the grant of awards covering an aggregate of 3,000,000 common units, all of which can be awarded in the form of restricted units. The plan is administered by the compensation committee of the general partner’s board of directors (the "Compensation Committee").

A restricted unit is a unit that is granted to grantees with certain vesting restrictions, which may be time-based and/or performance-based. Once these restrictions lapse, the grantee is entitled to full ownership of the unit without restrictions. The Compensation Committee may determine to make grants under the plan containing such terms as the Compensation Committee shall determine under the plan. With respect to time-based restricted units ("TBRU's"), the Compensation Committee will determine the time period over which restricted units granted to employees and directors will vest. The Compensation Committee may also award a percentage of restricted units with vesting requirements based upon the achievement of specified pre-established performance targets ("Performance Based Restricted Units" or "PBRU's"). The performance targets may include, but are not limited to, the following: revenue and income measures, cash flow measures, net income before interest expense and income tax expense ("EBIT"), net income before interest expense, income tax expense, and depreciation and amortization ("EBITDA"), distribution coverage metrics, expense measures, liquidity measures, market measures, corporate sustainability metrics, and other measures related to acquisitions, dispositions, operational objectives and succession planning objectives. PBRU's are earned only upon our achievement of an objective performance measure for the performance period. PBRU's which vest are payable in common units. Unvested units granted under the 2017 LTIP may or may not participate in cash distributions depending on the terms of each individual award agreement.

The restricted units issued to directors generally vest in equal annual installments over a four-year period. Restricted units issued to employees generally vest in equal annual installments over three years of service.

In February 2020, the Partnership issued 27,000 TBRU's to each of the Partnership's three independent directors under the 2017 LTIP. These restricted common units vest in equal installments of 6,750 units on January 24, 2021, 2022, 2023, and 2024.

On March 1, 2018, the Partnership issued 301,550 TBRU's and 317,925 PBRU's to certain employees of Martin Resource Management Corporation. The TBRU's vest in equal installments over a three-year service period. The PBRU's will vest at the conclusion of a three-year performance period based on certain performance targets. In addition, the PBRU's awarded on March 1, 2018 that are achieved will only vest if the grantee is employed by Martin Resource Management Corporation on March 31, 2021. As of June 30, 2020, the Partnership is unable to ascertain if certain performance conditions will be achieved and, as such, has not recognized compensation expense for the vesting of the units. The Partnership will record compensation expense for the vested portion of the units once the achievement of the performance condition is deemed probable.

The restricted units are valued at their fair value at the date of grant which is equal to the market value of common units on such date. A summary of the restricted unit activity for the six months ended June 30, 2020 is provided below:


	Number of Units		Weighted Average Grant-Date Fair Value Per Unit
Non-vested, beginning of period	379,019		$	13.91
Granted (TBRU)	81,000		$	2.53

Vested	(101,128)		$	13.95
Forfeited	(84,134)		$	13.90
Non-Vested, end of period	274,757		$	10.54

Aggregate intrinsic value, end of period	$	327

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

A summary of the restricted units’ aggregate intrinsic value (market value at vesting date) and fair value of units vested (market value at date of grant) during the three and six months ended June 30, 2020 and 2019 is provided below:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Aggregate intrinsic value of units vested	$	—	$	—	$	151	$	1,351
Fair value of units vested	—		—		1,427		1,551

As of June 30, 2020, there was $1,249 of unrecognized compensation cost related to non-vested restricted units. That cost is expected to be recognized over a weighted-average period of 1.37 years.

NOTE 12. RELATED PARTY TRANSACTIONS

As of June 30, 2020, Martin Resource Management Corporation owns 6,114,532 of the Partnership’s common units representing approximately 15.7% of the Partnership’s outstanding limited partner units. Martin Resource Management Corporation controls the Partnership's general partner by virtue of its 51% voting interest in Holdings, the sole member of the Partnership's general partner. The Partnership’s general partner, MMGP, owns a 2% general partner interest in the Partnership and the Partnership’s IDRs. The Partnership’s general partner’s ability, as general partner, to manage and operate the Partnership, and Martin Resource Management Corporation’s ownership as of June 30, 2020, effectively gives Martin Resource Management Corporation the ability to veto some of the Partnership’s actions and to control the Partnership’s management.

The following is a description of the Partnership’s material related party agreements and transactions:

Omnibus Agreement

Omnibus Agreement. The Partnership and its general partner are parties to the Omnibus Agreement dated November 1, 2002, with Martin Resource Management Corporation that governs, among other things, potential competition and indemnification obligations among the parties to the agreement, related party transactions, the provision of general administration and support services by Martin Resource Management Corporation and the Partnership’s use of certain Martin Resource Management Corporation trade names and trademarks. The Omnibus Agreement was amended on November 25, 2009, to include processing crude oil into finished products including naphthenic lubricants, distillates, asphalt and other intermediate cuts. The Omnibus Agreement was amended further on October 1, 2012, to permit the Partnership to provide certain lubricant packaging products and services to Martin Resource Management Corporation.

Non-Competition Provisions. Martin Resource Management Corporation has agreed for so long as it controls the general partner of the Partnership, not to engage in the business of:

•providing terminalling and storage services for petroleum products and by-products including the refining, blending and packaging of finished lubricants;

•providing land and marine transportation of petroleum products, by-products, and chemicals;

•distributing NGL's; and

•manufacturing and selling sulfur-based fertilizer products and other sulfur-related products.

This restriction does not apply to:

•the ownership and/or operation on the Partnership’s behalf of any asset or group of assets owned by it or its affiliates;

•any business operated by Martin Resource Management Corporation, including the following:

◦distributing fuel oil, marine fuel and other liquids;

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

◦providing marine bunkering and other shore-based marine services in Texas, Louisiana, Mississippi, Alabama, and Florida;

◦operating a crude oil gathering business in Stephens, Arkansas;

◦providing crude oil gathering, refining, and marketing services of base oils, asphalt, and distillate products in Smackover, Arkansas;

◦providing crude oil marketing and transportation from the well head to the end market;

◦operating an environmental consulting company;

◦supplying employees and services for the operation of the Partnership's business; and

◦operating, solely for our account, the asphalt facilities in each of Hondo, South Houston and Port Neches, Texas and Omaha, Nebraska.

•any business that Martin Resource Management Corporation acquires or constructs that has a fair market value of less than $5,000;

•any business that Martin Resource Management Corporation acquires or constructs that has a fair market value of $5,000 or more if the Partnership has been offered the opportunity to purchase the business for fair market value and the Partnership declines to do so with the concurrence of the conflicts committee of the board of directors of the general partner of the Partnership (the "Conflicts Committee"); and

•any business that Martin Resource Management Corporation acquires or constructs where a portion of such business includes a restricted business and the fair market value of the restricted business is $5,000 or more and represents less than 20% of the aggregate value of the entire business to be acquired or constructed; provided that, following completion of the acquisition or construction, the Partnership will be provided the opportunity to purchase the restricted business.

Services. Under the Omnibus Agreement, Martin Resource Management Corporation provides the Partnership with corporate staff, support services, and administrative services necessary to operate the Partnership’s business. The Omnibus Agreement requires the Partnership to reimburse Martin Resource Management Corporation for all direct expenses it incurs or payments it makes on the Partnership’s behalf or in connection with the operation of the Partnership’s business. There is no monetary limitation on the amount the Partnership is required to reimburse Martin Resource Management Corporation for direct expenses. In addition to the direct expenses, under the Omnibus Agreement, the Partnership is required to reimburse Martin Resource Management Corporation for indirect general and administrative and corporate overhead expenses.

Effective January 1, 2020, through December 31, 2020, the Conflicts Committee approved an annual reimbursement amount for indirect expenses of $16,410. The Partnership reimbursed Martin Resource Management Corporation for $4,103 and $4,164 of indirect expenses for the three months ended June 30, 2020 and 2019, respectively. The Partnership reimbursed Martin Resource Management Corporation for $8,261 and $8,328 of indirect expenses for the six months ended June 30, 2020 and 2019, respectively. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually.

These indirect expenses are intended to cover the centralized corporate functions Martin Resource Management Corporation provides to the Partnership, such as accounting, treasury, clerical, engineering, legal, billing, information technology, administration of insurance, general office expenses and employee benefit plans and other general corporate overhead functions the Partnership shares with Martin Resource Management Corporation retained businesses. The provisions of the Omnibus Agreement regarding Martin Resource Management Corporation’s services will terminate if Martin Resource Management Corporation ceases to control the general partner of the Partnership.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

Related Party Transactions. The Omnibus Agreement prohibits the Partnership from entering into any material agreement with Martin Resource Management Corporation without the prior approval of the Conflicts Committee. For purposes of the Omnibus Agreement, the term "material agreements" means any agreement between the Partnership and Martin Resource Management Corporation that requires aggregate annual payments in excess of the then-applicable agreed upon reimbursable amount of indirect general and administrative expenses. Please read "Services" above.

License Provisions. Under the Omnibus Agreement, Martin Resource Management Corporation has granted the Partnership a nontransferable, nonexclusive, royalty-free right and license to use certain of its trade names and marks, as well as the trade names and marks used by some of its affiliates.

Amendment and Termination. The Omnibus Agreement may be amended by written agreement of the parties; provided, however, that it may not be amended without the approval of the Conflicts Committee if such amendment would adversely affect the unitholders. The Omnibus Agreement was first amended on November 25, 2009, to permit the Partnership to provide refining services to Martin Resource Management Corporation. The Omnibus Agreement was amended further on October 1, 2012, to permit the Partnership to provide certain lubricant packaging products and services to Martin Resource Management Corporation. Such amendments were approved by the Conflicts Committee. The Omnibus Agreement, other than the indemnification provisions and the provisions limiting the amount for which the Partnership will reimburse Martin Resource Management Corporation for general and administrative services performed on its behalf, will terminate if the Partnership is no longer an affiliate of Martin Resource Management Corporation.

Master Transportation Services Agreement

Master Transportation Agreement. Martin Transport, Inc. ("MTI"), a wholly owned subsidiary of the Partnership, is a party to a master transportation services agreement effective January 1, 2019, with certain wholly owned subsidiaries of Martin Resource Management Corporation. Under the agreement, MTI agreed to transport Martin Resource Management Corporation's petroleum products and by-products.

Term and Pricing. The agreement will continue unless either party terminates the agreement by giving at least 30 days' written notice to the other party. These rates are subject to any adjustments which are mutually agreed upon or in accordance with a price index. Additionally, shipping charges are also subject to fuel surcharges determined on a weekly basis in accordance with the U.S. Department of Energy’s national diesel price list.

Indemnification. MTI has agreed to indemnify Martin Resource Management Corporation against all claims arising out of the negligence or willful misconduct of MTI and its officers, employees, agents, representatives and subcontractors. Martin Resource Management Corporation has agreed to indemnify MTI against all claims arising out of the negligence or willful misconduct of Martin Resource Management Corporation and its officers, employees, agents, representatives and subcontractors. In the event a claim is the result of the joint negligence or misconduct of MTI and Martin Resource Management Corporation, indemnification obligations will be shared in proportion to each party’s allocable share of such joint negligence or misconduct.

Marine Agreements

Marine Transportation Agreement. The Partnership is a party to a marine transportation agreement effective January 1, 2006, as amended, under which the Partnership provides marine transportation services to Martin Resource Management Corporation on a spot-contract basis at applicable market rates. Effective each January 1, this agreement automatically renews for consecutive one year periods unless either party terminates the agreement by giving written notice to the other party at least 60 days prior to the expiration of the then applicable term. The fees the Partnership charges Martin Resource Management Corporation are based on applicable market rates.

Marine Fuel. The Partnership is a party to an agreement with Martin Resource Management Corporation dated November 1, 2002, under which Martin Resource Management Corporation provides the Partnership with marine fuel from its locations in the Gulf of Mexico at a fixed rate in excess of the Platt’s U.S. Gulf Coast Index for #2 Fuel Oil. Under this agreement, the Partnership agreed to purchase all of its marine fuel requirements that occur in the areas serviced by Martin Resource Management Corporation.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

Terminal Services Agreements

Diesel Fuel Terminal Services Agreement. Effective January 1, 2016, the Partnership entered into a second amended and restated terminalling services agreement under which the Partnership provides terminal services to Martin Resource Management Corporation for marine fuel distribution. At such time, the per-gallon throughput fee the Partnership charged under this agreement was increased when compared to the previous agreement and may be adjusted annually based on a price index. This agreement was further amended on January 1, 2017, October 1, 2017, April 1, 2019, and January 1, 2020 to modify its minimum throughput requirements and throughput fees. The term of this agreement is currently evergreen and it will continue on a month to month basis until terminated by either party by giving 60 days’ written notice.

Miscellaneous Terminal Services Agreements. The Partnership is currently party to several terminal services agreements and from time to time the Partnership may enter into other terminal service agreements for the purpose of providing terminal services to related parties. Individually, each of these agreements is immaterial but when considered in the aggregate they could be deemed material. These agreements are throughput based with a minimum volume commitment. Generally, the fees due under these agreements are adjusted annually based on a price index.

Other Agreements

Cross Tolling Agreement. The Partnership is a party to an amended and restated tolling agreement with Cross Oil Refining and Marketing, Inc. ("Cross") dated October 28, 2014, under which the Partnership processes crude oil into finished products, including naphthenic lubricants, distillates, asphalt and other intermediate cuts for Cross. The tolling agreement expires November 25, 2031. Under this tolling agreement, Cross agreed to process a minimum of 6,500 barrels per day of crude oil at the facility at a fixed price per barrel. Any additional barrels are processed at a modified price per barrel. In addition, Cross agreed to pay a monthly reservation fee and a periodic fuel surcharge fee based on certain parameters specified in the tolling agreement. Further, certain capital improvements, to the extent requested by Cross, are reimbursed through a capital recovery fee. As of December 31, 2019, the annual capital recovery fee reimbursement of $2,088 expired. An additional $2,586 of capital recovery fee reimbursement will expire on December 31, 2020. All of these fees (other than the fuel surcharge and capital recovery fee) are subject to escalation annually based upon the greater of 3% or the increase in the Consumer Price Index for a specified annual period. Also, the Partnership renegotiated a crude transportation contract set to expire in the first half of 2022 resulting in a reduction in revenue of $2,145 annually beginning January 1, 2020.

Other Miscellaneous Agreements. From time to time the Partnership enters into other miscellaneous agreements with Martin Resource Management Corporation for the provision of other services or the purchase of other goods.

The tables below summarize the related party transactions that are included in the related financial statement captions on the face of the Partnership’s Consolidated and Condensed Statements of Operations. The revenues, costs and expenses reflected in these tables are tabulations of the related party transactions that are recorded in the corresponding captions of the consolidated and condensed financial statements and do not reflect a statement of profits and losses for related party transactions.

The impact of related party revenues from sales of products and services is reflected in the consolidated and condensed financial statements as follows:

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenues:
Terminalling and storage	$	15,942	$	17,477	$	31,816	$	36,449
Transportation	5,393		5,856		11,287		11,499

Product sales:

Sulfur services	9		9		28		16
Terminalling and storage	29		277		102		691
	38		286		130		707
	$	21,373	$	23,619	$	43,233	$	48,655

The impact of related party cost of products sold is reflected in the consolidated and condensed financial statements as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Cost of products sold:
Sulfur services	$	2,554	$	2,884	$	5,321	$	5,458
Terminalling and storage	4,249		7,203		10,026		13,112
	$	6,803	$	10,087	$	15,347	$	18,570

The impact of related party operating expenses is reflected in the consolidated and condensed financial statements as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Operating expenses:
Transportation	$	13,388	$	16,319	$	28,941	$	31,299
Natural gas liquids	498		2,054		995		4,079
Sulfur services	1,137		1,402		2,283		2,326
Terminalling and storage	4,417		4,632		8,992		9,239
	$	19,440	$	24,407	$	41,211	$	46,943

The impact of related party selling, general and administrative expenses is reflected in the consolidated and condensed financial statements as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Selling, general and administrative:
Transportation	$	1,817	$	1,729	$	3,656	$	3,457
Natural gas liquids	533		1,128		1,237		2,317
Sulfur services	746		710		1,489		1,426
Terminalling and storage	835		737		1,673		1,454
Indirect, including overhead allocation	4,124		4,254		8,312		8,439
	$	8,055	$	8,558	$	16,367	$	17,093

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

NOTE 13. BUSINESS SEGMENTS

The Partnership has four reportable segments: terminalling and storage, transportation, sulfur services and natural gas liquids. The Partnership’s reportable segments are strategic business units that offer different products and services. The operating income of these segments is reviewed by the chief operating decision maker to assess performance and make business decisions.

The accounting policies of the operating segments are the same as those described in Note 2 in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020. The Partnership evaluates the performance of its reportable segments based on operating income. There is no allocation of administrative expenses or interest expense.


Three Months Ended June 30, 2020	Operating Revenues		Intersegment Revenues Eliminations		Operating Revenues after Eliminations		Depreciation and Amortization		Operating Income (Loss) after Eliminations		Capital Expenditures and Plant Turnaround Costs
Terminalling and storage	46,976		(1,542)		45,434		7,272		2,969		3,427
Transportation	35,259		(3,774)		31,485		4,328		(2,078)		772
Sulfur services	33,420		—		33,420		3,131		8,814		1,739
Natural gas liquids	30,300		(1)		30,299		612		2,616		70
Indirect selling, general and administrative	—		—		—		—		(4,361)		—
Total	$	145,955	$	(5,317)	$	140,638	$	15,343	$	7,960	$	6,008


Three Months Ended June 30, 2019	Operating Revenues		Intersegment Revenues Eliminations		Operating Revenues after Eliminations		Depreciation and Amortization		Operating Income (Loss) after Eliminations		Capital Expenditures and Plant Turnaround Costs
Terminalling and storage	54,351		(1,603)		52,748		7,826		4,254		3,668
Transportation	47,233		(5,912)		41,321		3,778		(2,629)		746
Sulfur services	35,856		—		35,856		2,854		7,528		3,273
Natural gas liquids	57,398		—		57,398		629		456		940
Indirect selling, general and administrative	—		—		—		—		(4,599)		—
Total	$	194,838	$	(7,515)	$	187,323	$	15,087	$	5,010	$	8,627


Six Months Ended June 30, 2020	Operating Revenues		Intersegment Revenues Eliminations		Operating Revenues after Eliminations		Depreciation and Amortization		Operating Income (Loss) after Eliminations		Capital Expenditures and Plant Turnaround Costs
Terminalling and storage	$	98,110	$	(3,268)	$	94,842	$	14,728	$	3,727	$	7,022
Transportation	80,433		(10,007)		70,426		8,608		(7,099)		4,698
Sulfur services	61,756		(13)		61,743		6,025		22,672		4,874
Natural gas liquids	112,515		(5)		112,510		1,221		12,993		175
Indirect selling, general and administrative	—		—		—		—		(8,733)		—
Total	$	352,814	$	(13,293)	$	339,521	$	30,582	$	23,560	$	16,769

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)


Six Months Ended June 30, 2019	Operating Revenues		Intersegment Revenues Eliminations		Operating Revenues after Eliminations		Depreciation and Amortization		Operating Income (Loss) after Eliminations		Capital Expenditures and Plant Turnaround Costs
Terminalling and storage	$	110,243	$	(3,324)	$	106,919	$	15,663	$	9,069	$	9,013
Transportation	92,419		(13,303)		79,116		7,348		(6,509)		3,207
Sulfur services	67,449		—		67,449		5,722		13,908		5,479
Natural gas liquids	173,872		—		173,872		1,255		7,314		1,227
Indirect selling, general and administrative	—		—		—		—		(9,166)		—
Total	$	443,983	$	(16,627)	$	427,356	$	29,988	$	14,616	$	18,926

The Partnership's assets by reportable segment as of June 30, 2020 and December 31, 2019, are as follows:


	June 30, 2020		December 31, 2019
Total assets:
Terminalling and storage	$	286,233	$	292,136
Transportation	163,951		170,045
Sulfur services	104,113		110,780
Natural gas liquids	62,682		94,195
Total assets	$	616,979	$	667,156

NOTE 14. COMMITMENTS AND CONTINGENCIES

Contingencies

From time to time, the Partnership is subject to various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Partnership.

On December 31, 2015, the Partnership received a demand from a customer in its lubricants packaging business for defense and indemnity in connection with lawsuits filed against it in various United States District Courts, which generally allege that the customer engaged in unlawful and deceptive business practices in connection with its marketing and advertising of its private label motor oil. The Partnership disputes that it has any obligation to defend or indemnify the customer for its conduct. Accordingly, on January 7, 2016, the Partnership filed a Complaint for Declaratory Judgment in the Chancery Court of Davidson County, Tennessee requesting a judicial determination that the Partnership does not owe the customer the demanded defense and indemnity obligations. The lawsuits against the customer have been transferred to the United States District Court for the Western District of Missouri for consolidated pretrial proceedings. On March 1, 2017, at the request of the parties, the Chancery Court of Davidson County, Tennessee administratively closed the Partnership's lawsuit pending rulings in the United States District Court for the Western District of Missouri. In the event that either party moves the Chancery Court of Davidson County, Tennessee to reopen the case, we expect the Court would grant such motion and reopen the case. Further, the same customer has made a claim under the Partnership’s insurance policy. The insurer has denied the claim. However, in the event that the customer is successful in pursuing the claim, such action would negatively impact the Partnership because the Partnership may have certain reimbursement obligations it would owe the insurance company. If the case is reopened or the insurance claim by the customer is successful, we are currently unable to determine the exposure we may have in this matter, if any.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

NOTE 15. FAIR VALUE MEASUREMENTS

The Partnership uses a valuation framework based upon inputs that market participants use in pricing certain assets and liabilities. These inputs are classified into two categories: observable inputs and unobservable inputs. Observable inputs represent market data obtained from independent sources. Unobservable inputs represent the Partnership's own market assumptions. Unobservable inputs are used only if observable inputs are unavailable or not reasonably available without undue cost and effort. The two types of inputs are further prioritized into the following hierarchy:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that reflect the entity's own assumptions and are not corroborated by market data.

Assets and liabilities measured at fair value on a recurring basis are summarized below:


	Level 2
	June 30, 2020		December 31, 2019
Commodity derivative contracts, net	$	—	$	(667)

The Partnership is required to disclose estimated fair values for its financial instruments. Fair value estimates are set forth below for these financial instruments. The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

•Accounts and other receivables, trade and other accounts payable, accrued interest payable, other accrued liabilities, income taxes payable and due from/to affiliates: The carrying amounts approximate fair value due to the short maturity and highly liquid nature of these instruments, and as such these have been excluded from the table below. There is negligible credit risk associated with these instruments.

•Current and non-current portion of long-term debt: The carrying amount of the revolving credit facility approximates fair value due to the debt having a variable interest rate and is in Level 2. The estimated fair value of the 2021 Notes is considered Level 1, as the fair value is based on quoted market prices in active markets.


	June 30, 2020						December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
2021 Notes	$	364,219	$	294,685	$	373,374	$	343,470

NOTE 16. CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The Partnership's operations are conducted by its operating subsidiaries as it has no independent assets or operations. Martin Operating Partnership L.P. (the "Operating Partnership"), the Partnership’s wholly-owned subsidiary, and the Partnership's other operating subsidiaries have issued in the past, and may issue in the future, unconditional guarantees of senior or subordinated debt securities of the Partnership. The guarantees that have been issued are full, irrevocable and unconditional and joint and several. In addition, the Operating Partnership may also issue senior or subordinated debt securities which, if issued, will be fully, irrevocably and unconditionally guaranteed by the Partnership. Substantially all of the Partnership's operating subsidiaries are subsidiary guarantors of its 2021 Notes and any subsidiaries other than the subsidiary guarantors are minor.

NOTE 17. INCOME TAXES


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Provision for income taxes	$	790	$	639	$	1,137	$	1,335

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

The operations of a partnership are generally not subject to income taxes, except for Texas margin tax, because its income is taxed directly to its partners. MTI, a wholly owned subsidiary of the Partnership, is subject to income taxes due to its corporate structure. Total income tax expense of $590 and $937, related to the operation of the subsidiary, for the three and six months ended June 30, 2020, resulted in an effective income tax rate of (472)% and 98.32%, respectively. Total income tax expense of $429 and $877, related to the operation of the subsidiary, for the three and six months ended June 30, 2019, respectively, resulted in an effective income tax rate ("ETR") of 26.3% and 25.49%, respectively.

The following items caused the quarterly and year-to-date ETR to be significantly different from the historical annual effective income tax rate ("AETR"):

•Pretax loss recorded for the three months ended June 30, 2020 due to the economic downturn resulting from the coronavirus pandemic.

•The Partnership has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the AETR for the full year to "ordinary" income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. The Partnership has used a discrete ETR method to calculate taxes for the three and six month periods ended June 30, 2020. The Partnership determined that since small changes in estimated "ordinary" income would result in significant changes in the estimated AETR, the historical method would not provide a reliable estimate for the three and six month periods ended June 30, 2020.

•During the second quarter and six months ended June 30, 2020, the Partnership recorded an income tax expense of approximately $341 related to the filing of the 2019 Federal income tax return, which decreased the quarter-to-date ETR by 272.8% and increased the year-to-date ETR by 35.78%.

The Coronavirus Aid, Relief, and Economic Security ("CARES") Act was enacted on March 27, 2020, in response to the market volatility and instability resulting from the COVID-19 pandemic, and includes changes to various income tax provisions including, but not limited to, providing for a five-year carryback of net operating losses generated in taxable years beginning after December 31, 2017, and before January 1, 2021, suspension of the 80% taxable income limitation for net operating losses generated after December 31, 2017, and before January 1, 2021, and relaxation of the limitation of adjusted taxable income as determined under Internal Revenue Code Section 163(j) from 30% to 50% when determining the deduction for business interest expense for 2019 and 2020. Since, prior to its acquisition by the Partnership, MTI was a Qualified Subchapter S subsidiary ("QSub") of Martin Resource Management Corporation, it is precluded from carrying back net operating losses to its QSub taxable years. The other applicable provisions of the CARES Act have no material impact on the AETR, deferred taxes, or valuation allowances.

A current federal income tax expense (benefit) of $(307) and $(174), related to the operation of the subsidiary, were recorded for the three and six months ended June 30, 2020, respectively, and $(78) and $218, for the three and six months ended June 30, 2019, respectively. A current state income tax expense (benefit) of $164 and $93, related to the operation of the subsidiary, were recorded for the three and six months ended June 30, 2020, respectively, and $20 and $(198) for the three and six months ended June 30, 2019, respectively.

With respect to MTI, income taxes are accounted for under the asset and liability method pursuant to the provisions of ASC 740 related to income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A deferred tax expense related to the MTI temporary differences of $733 and $487 was recorded for the three months ended June 30, 2020 and 2019, respectively, and $1,018 and $856 was recorded for the six months ended June 30, 2020 and 2019, respectively. A deferred tax asset of $22,404 and $23,422, related to the cumulative book and tax temporary differences, existed at June 30, 2020 and December 31, 2019, respectively.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

All income tax positions taken for all open years are more likely than not to be sustained based upon their technical merit under applicable tax laws.

NOTE 18. SUBSEQUENT EVENTS

Quarterly Distribution. On July 27, 2020, the Partnership declared a quarterly cash distribution of $0.005 per common unit for the second quarter of 2020, or $0.020 per common unit on an annualized basis, which will be paid on August 14, 2020 to unitholders of record as of August 7, 2020.

Amendment to Credit Facility. On July 8, 2020, the Partnership amended its revolving credit facility (such amendment, the "Credit Facility Amendment") to, in part, facilitate the transactions contemplated by the Restructuring Support Agreement.

Upon the closing of the Credit Facility Amendment, the revolving credit facility was amended to, among other things:

•require the Partnership to prepay revolving loans to the extent that its Excess Cash (as defined in the Credit Facility Amendment) exceeds $25.0 million; and

•provide that the maturity date of the lenders’ commitments under the revolving credit facility is August 31, 2023; however, the maturity date will be:

◦August 19, 2020 if either (x) more than $36.5 million of the 2021 Notes remain outstanding after completion of the Exchange Offer or (y) the Exchange Offer has not been completed by August 15, 2020 and the Partnership has not commenced the chapter 11 proceedings contemplated by the Plan prior to August 19, 2020; or

◦October 16, 2020 if the Partnership commences the chapter 11 proceedings contemplated by the Plan and the Plan is not effective by October 16, 2020.

Upon the earlier of (x) the closing of the Exchange Offer and Cash Tender Offer and satisfaction of certain other conditions set forth in the Credit Facility Amendment and (y) August 15, 2020, the Credit Facility Amendment will amend the Partnership’s revolving credit facility to, among other things:

•permit the Partnership to issue up to $54.0 million of the New Notes and up to $323.0 million of the Exchange Notes, subject to the restrictions set forth therein;

•reduce the aggregate amount of commitments under the revolving credit facility from $400 million to $300 million;

•require an additional $25 million reduction in the commitments under the revolving credit facility if the Partnership receives $25 million or more in net cash proceeds from any asset sale;

•limit the Partnership’s ability to make quarterly distributions to its unitholders in excess of $0.005 per unit unless the Partnership’s Total Leverage Ratio (as defined in the revolving credit facility) is below 3.75x;

^•increase the pricing under the revolving credit facility and add a 1.0% LIBOR floor;

•require the Partnership to maintain a minimum Interest Coverage Ratio (as defined in the revolving credit facility) of 2.0:1.0 with respect to the fiscal quarters ending in September and December of 2020, 1.75:1.0 with respect to each fiscal quarter ending in 2021, and 2.0x with respect to each fiscal quarter thereafter;

•require the Partnership to maintain a maximum Total Leverage Ratio (as defined in the Credit Facility Amendment) of not more than 5.75:1.0 with respect to the fiscal quarters ending in September and December of 2020 and March and June of 2021, 5.50 with respect to the fiscal quarter ending in September of 2021, 5.00 with respect to the fiscal quarter ending in December of 2021 and the fiscal quarters ending in March, June and September of 2022, and

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

(Unaudited)

4.50:1.0 with respect to each fiscal quarter thereafter, which financial covenant replaces the existing maximum Leverage Ratio (as defined in the revolving credit facility in effect prior to the Credit Facility Amendment);

•require the Partnership to maintain a maximum First Lien Leverage Ratio (as defined in the Credit Facility Amendment) of not more than 2.25:1.0 with respect to the fiscal quarters ending in September and December of 2020 and each fiscal quarter ending in 2021, and 2.0:1.0 with respect to each fiscal quarter thereafter, which financial covenant replaces the existing maximum Senior Leverage Ratio (as defined in the revolving credit facility in effect prior to the Credit Facility Amendment).

Backstop Agreement. On July 9, 2020, the Partnership entered into a Backstop Agreement with certain of the Supporting Holders of the 2021 Notes, pursuant to which such Supporting Holders agreed to purchase any unsubscribed New Notes that are not purchased by eligible holders in the Rights Offering, or if the Exchange Offer and Cash Tender Offer are not consummated, pursuant to the Plan.

The Partnership has agreed to pay the Supporting Holders a backstop commitment fee of $3.75 million allocated among the Supporting Holders based on their pro rata shares of the backstop commitment, which commitment fee will be paid in New Notes. However, if the Restructuring Support Agreement is terminated due to the Partnership’s governing body exercising its fiduciary duties, if the backstop agreement is materially breached by the Partnership and therefore terminated by the Supporting Holdings, or if the New Notes are not issued by August 17, 2020 and the Partnership has not commenced Chapter 11 Cases, the commitment fee will be paid in cash.

Exchange Offer. On July 9, 2020, the Partnership commenced the Exchange Offer, the Cash Tender Offer, the Rights Offering and the consent solicitation contemplated by the Restructuring Support Agreement. The Exchange Offer expires at 5:00 p.m., New York City time, on August 7, 2020; however, the Early Participation Date occurred at 5:00 p.m., New York City time, on July 23, 2020. As of the Early Participation Date, the Partnership received tenders of approximately $335.5 million aggregate principal amount of the 2021 Notes, which represented approximately 92.045% in principal amount of the 2021 Notes. On July 31, 2020, the required amount of Supporting Holders and the Partnership entered into an amendment to the Restructuring Support Agreement that, among other things, reduced the Minimum Participation Condition from 95% to 92% in principal amount of 2021 Notes tendered. As a result, the Minimum Participation Condition has been satisfied and, subject to satisfaction of other customary closing conditions, the Exchange offer and Cash Tender Offer will be consummated on or about August 12, 2020 and the Plan will not be filed.

In addition, the Partnership received the requisite majority consent necessary for the adoption of the proposed amendments to the 2021 Notes Indenture, which will, among other things, eliminate substantially all of the restrictive covenants in the 2021 Notes Indenture, delete certain events of default, and shorten the period of advance notice required to be given to holders of 2021 Notes from 30 days to three business days in the case of a redemption of the 2021 Notes.

This description of the Exchange Offer, Cash Tender Offer and related consent solicitations (collectively, the "Offers") is for informational purposes only and does not constitute an offer to purchase or exchange or a solicitation of an offer to purchase or exchange any 2021 Notes or an offer to sell securities. The Offers are being made only pursuant to the Exchange Offer Memorandum, Consent Solicitation, Rights Offering, and Disclosure Statement Soliciting Acceptances of a Prepackaged Plan of Reorganization (the "Offering Memorandum") and Offer to Purchase and Consent Solicitation Statement, each dated July 9, 2020, which set forth a more detailed description of the terms of the Offers.


Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated and condensed financial statements and the notes thereto included elsewhere in this quarterly report.

Overview

We are a publicly traded limited partnership with a diverse set of operations focused primarily in the U.S. Gulf Coast region. Our four primary business lines include:

•Terminalling, processing, storage and packaging services for petroleum products and by-products including the refining of naphthenic crude oil;

•Land and marine transportation services for petroleum products and by-products, chemicals, and specialty products;

•Sulfur and sulfur-based products processing, manufacturing, marketing, and distribution; and

•NGL marketing, distribution, and transportation services.

The petroleum products and by-products we collect, transport, store and market are produced primarily by major and independent oil and gas companies who often turn to third parties, such as us, for the transportation and disposition of these products. In addition to these major and independent oil and gas companies, our primary customers include independent refiners, large chemical companies, and other wholesale purchasers of these products. We operate primarily in the U.S. Gulf Coast region. This region is a major hub for petroleum refining, natural gas gathering and processing, and support services for the exploration and production industry.

We were formed in 2002 by Martin Resource Management Corporation, a privately-held company whose initial predecessor was incorporated in 1951 as a supplier of products and services to drilling rig contractors. Since then, Martin Resource Management Corporation has expanded its operations through acquisitions and internal expansion initiatives as its management identified and capitalized on the needs of producers and purchasers of petroleum products and by-products and other bulk liquids. Martin Resource Management Corporation is an important supplier and customer of ours. As of June 30, 2020, Martin Resource Management Corporation owned 15.7% of our total outstanding common limited partner units. Furthermore, Martin Resource Management Corporation controls Martin Midstream GP LLC ("MMGP"), our general partner, by virtue of its 51% voting interest in MMGP Holdings, LLC ("Holdings"), the sole member of MMGP. MMGP owns a 2.0% general partner interest in us and all of our incentive distribution rights. Martin Resource Management Corporation directs our business operations through its ownership interests in and control of our general partner.

We entered into an omnibus agreement dated November 1, 2002, with Martin Resource Management Corporation (the "Omnibus Agreement") that governs, among other things, potential competition and indemnification obligations among the parties to the agreement, related party transactions, the provision of general administration and support services by Martin Resource Management Corporation and our use of certain of Martin Resource Management Corporation’s trade names and trademarks. Under the terms of the Omnibus Agreement, the employees of Martin Resource Management Corporation are responsible for conducting our business and operating our assets.

Martin Resource Management Corporation has operated our business since 2002. Martin Resource Management Corporation began operating our NGL business in the 1950s and our sulfur business in the 1960s. It began our land transportation business in the early 1980s and our marine transportation business in the late 1980s. It entered into our fertilizer and terminalling and storage businesses in the early 1990s.

Significant Recent Developments

COVID-19

The Partnership continues to prioritize the health and safety of our employees, the businesses we serve, and the communities where we live and work. To support the safety of all of our employees and operations, precautionary measures were implemented to prevent the COVID-19 virus from spreading in our workplace or the locations we serve, including suspending non-essential travel, limiting the number of employees attending meetings, reducing the number of people at our locations at any one time, monitoring the health of all employees, and implementing work-from-home initiatives for all eligible

employees. Further, we continue to provide awareness training for all of our drivers, vessel crews, blending operators and other affected personnel regarding preventative measures in or around our docks, vessels, and trucks and locations to which they are delivering. Our communication lines are open 24/7 for the environmental health and safety division, land and marine logistics, and sales and marketing teams.

Due to the economic impacts of the COVID-19 pandemic, the markets have experienced a decline in oil prices in response to oil demand concerns. These concerns were further exacerbated by the price war among members of OPEC and other non-OPEC producer nations during the first quarter 2020 and global storage considerations. Travel restrictions and stay-at-home orders implemented by governments in many regions and countries across the globe, including the United States, have greatly impacted the demand for refined products resulting in a significant reduction in refinery utilization. The COVID-19 pandemic has impacted our 2020 performance to date. The impact of this outbreak started in February and continued through the second quarter, during which time we have seen unfavorable trends in certain key metrics across several of our business lines compared to recent periods.

We expect to continue to experience the adverse impacts of COVID-19 on our business throughout the remainder of 2020 as a result of an expected continued reduction in refined product demand across the industries we serve. While the Gulf Coast Region where the majority of our refinery services is focused has reopened their economies, the increase in COVID-19 cases and the impact on refinery utilization due to demand destruction is not clear. As we look forward in our Terminalling and Storage segment, we continue to expect minimal impact on the storage component of this business due to minimum volume commitment contracts. However, downside risk remains in our packaged lubricant and grease businesses due to reduced demand from our oil and gas production customers and our construction customers. In our Transportation segment, reduced demand for refined products and chemicals is expected to continue to impact our land and marine transportation businesses. In our Natural Gas Liquids segment, our butane optimization business could be impacted by reduced butane production out of third-party refineries as they run at lower utilization rates during the economic shutdown. Looking forward in our Sulfur Services segment, we believe our molten sulfur business will not be affected as we are paid a monthly logistics fee by our primary customer. However, we continue to believe there will be reduced overall sulfur volumes from third-party refineries, which will negatively impact our prilling volume, reducing our operating fee revenue. We expect, however, to continue to receive our reservation fees regardless of the amount of sulfur volume processed through our prillers.

The extent to which the duration and severity of the pandemic impacts our business, results of operations, and financial condition, will depend on future developments, which are highly uncertain and cannot be predicted at this time. Accordingly, the full impact of COVID-19 will not be reflected in our results of operations and overall financial performance until future periods. In an effort to conserve capital in the near-term, we are actively considering, planning and executing expense reduction initiatives and have elected to defer certain maintenance and growth capital expenditures until 2021.

Management also assessed the extent to which the current macroeconomic events brought about by COVID-19 and significant declines in refined product demand impacted the valuation of expected credit losses on accounts receivable and certain inventory items or resulted in modifications to any significant contracts. Ultimately the results of these assessments did not have a material impact on our results as of June 30, 2020.

Other Recent Developments

Beginning in July of 2018, we committed to strengthening our balance sheet through strategic initiatives aimed at reducing leverage by divesting non-core assets and businesses, creating the ability to focus on a streamlined corporate strategy and position the Partnership for growth.

The first set of initiatives was executed in 2018 with the divestiture of our 20% interest in West Texas LPG Pipeline Limited Partnership for $195.0 million and the sale of a non-strategic terminal asset located in Nevada for $8.0 million. On January 1, 2019, we completed the next initiative with the acquisition of Martin Transport, Inc. from Martin Resource Management Corporation for $135.0 million, positioning us for cash flow growth. On July 1, 2019, we completed the sale of our natural gas storage assets for $215.0 million, which was an important piece of the Partnership’s strategy to strengthen the balance sheet and re-focus our operational expertise on the refinery services industry. On August 12, 2019, we completed the sale of our East Texas Pipeline for $17.5 million.

As a result of dispositions, offset by acquisitions, we were able to pay down $300.5 million of outstanding debt while incurring only a slight reduction to projected EBITDA. Consistent with our strategy of reducing leverage and improving

liquidity, on January 28, 2020, we announced a $0.75 per unit reduction of our cash distribution on an annual basis, allowing us to retain $29.2 million to continue to strengthen our balance sheet.

Subsequent Events

Quarterly Distribution. On July 27, 2020, we declared a quarterly cash distribution of $0.005 per common unit for the second quarter of 2020, or $0.020 per common unit on an annualized basis, which will be paid on August 14, 2020 to unitholders of record as of August 7, 2020.

Restructuring Support Agreement; Exchange Offer and Related Transactions. On June 25, 2020, the Partnership entered into the Restructuring Support Agreement with certain Supporting Holders, pursuant to which such holders and the Partnership agreed to enter into and implement a proposed debt restructuring transaction through the Exchange Offer and Cash Tender Offer, and if the Exchange Offer and Cash Tender Offer are unsuccessful, the Restructuring Support Agreement provides agreed-upon terms for a pre-packaged financial restructuring Plan to be filed in the Chapter 11 Cases. As of the Early Participation Date, the Partnership received tenders of approximately $335.5 million aggregate principal amount of the 2021 Notes, which represented approximately 92.045% in principal amount of the 2021 Notes. On July 31, 2020, the required amount of Supporting Holders and the Partnership entered into an amendment to the Restructuring Support Agreement that, among other things, reduced the Minimum Participation Condition from 95% to 92% in principal amount of 2021 Notes tendered. As a result, the Minimum Participation Condition has been satisfied and, subject to satisfaction of other customary closing conditions, the Exchange offer and Cash Tender Offer will be consummated on or about August 12, 2020 and the Plan will not be filed. In addition, the Partnership received the requisite majority consent necessary for the adoption of the proposed amendments to the 2021 Notes Indenture, which will, among other things, eliminate substantially all of the restrictive covenants in the 2021 Notes Indenture, delete certain events of default, and shorten the period of advance notice required to be given to holders of 2021 Notes from 30 days to three business days in the case of a redemption of the 2021 Notes. Please see Note 1 and Note 18 in Part I of this Form 10-Q for more information about the Restructuring Support Agreement, the Exchange Offer and related transactions.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on the historical consolidated and condensed financial statements included elsewhere herein. We prepared these financial statements in conformity with United States generally accepted accounting principles ("U.S. GAAP"). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. We routinely evaluate these estimates, utilizing historical experience, consultation with experts and other methods we consider reasonable in the particular circumstances. Our results may differ from these estimates, and any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. Changes in these estimates could materially affect our financial position, results of operations or cash flows. See the "Critical Accounting Policies and Estimates" section in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 2, "Significant Accounting Policies" in Notes to Consolidated Financial Statements included within our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020.

Our Relationship with Martin Resource Management Corporation

Martin Resource Management Corporation is engaged in the following principal business activities:

•distributing fuel oil, asphalt, marine fuel and other liquids;

•providing marine bunkering and other shore-based marine services in Texas, Louisiana, Mississippi, Alabama, and Florida;

•operating a crude oil gathering business in Stephens, Arkansas;

•providing crude oil gathering, refining, and marketing services of base oils, asphalt, and distillate products in Smackover, Arkansas;

•providing crude oil marketing and transportation from the well head to the end market;

•operating an environmental consulting company;

•supplying employees and services for the operation of our business; and

•operating, solely for our account, the asphalt facilities in each of Hondo, South Houston and Port Neches, Texas and Omaha, Nebraska.

We are and will continue to be closely affiliated with Martin Resource Management Corporation as a result of the following relationships.

Ownership

Martin Resource Management Corporation owns approximately 15.7% of the outstanding limited partner units. In addition, Martin Resource Management Corporation controls MMGP, our general partner, by virtue of its 51% voting interest in Holdings, the sole member of MMGP. MMGP owns a 2% general partner interest in us and all of our incentive distribution rights.

Management

Martin Resource Management Corporation directs our business operations through its ownership interests in and control of our general partner. We benefit from our relationship with Martin Resource Management Corporation through access to a significant pool of management expertise and established relationships throughout the energy industry. We do not have employees. Martin Resource Management Corporation employees are responsible for conducting our business and operating our assets on our behalf.

Related Party Agreements

The Omnibus Agreement requires us to reimburse Martin Resource Management Corporation for all direct expenses it incurs or payments it makes on our behalf or in connection with the operation of our business. We reimbursed Martin Resource Management Corporation for $30.2 million of direct costs and expenses for the three months ended June 30, 2020 compared to $38.8 million for the three months ended June 30, 2019. We reimbursed Martin Resource Management Corporation for $64.6 million of direct costs and expenses for the six months ended June 30, 2020 compared to $74.2 million for the six months ended June 30, 2019. There is no monetary limitation on the amount we are required to reimburse Martin Resource Management Corporation for direct expenses.

In addition to the direct expenses, under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporation for indirect general and administrative and corporate overhead expenses. For the three months ended June 30, 2020 and 2019, the conflicts committee of the board of directors of the general partner of the Partnership (the "Conflicts Committee") approved reimbursement amounts of $4.1 million and $4.3 million, respectively. In each of the six months ended June 30, 2020 and 2019, the Conflicts Committee approved reimbursement amounts of $8.3 million and $8.4 million, respectively. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually. These indirect expenses covered the centralized corporate functions Martin Resource Management Corporation provides for us, such as accounting, treasury, clerical, engineering, legal, billing, information technology, administration of insurance, general office expenses and employee benefit plans and other general corporate overhead functions we share with Martin Resource Management Corporation’s retained businesses. The Omnibus Agreement also contains significant non-compete provisions and indemnity obligations. Martin Resource Management Corporation also licenses certain of its trademarks and trade names to us under the Omnibus Agreement.

These additional agreements include, but are not limited to, a master transportation services agreement, marine transportation agreements, terminal services agreements, a tolling agreement, and a sulfuric acid sales agency agreement. Pursuant to the terms of the Omnibus Agreement, we are prohibited from entering into certain material agreements with Martin Resource Management Corporation without the approval of the Conflicts Committee.

For a more comprehensive discussion concerning the Omnibus Agreement and the other agreements that we have entered into with Martin Resource Management Corporation, please refer to "Item 13. Certain Relationships and Related Transactions, and Director Independence" set forth in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020.

Commercial

We have been and anticipate that we will continue to be both a significant customer and supplier of products and services offered by Martin Resource Management Corporation. In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 26% and 24% of our total costs and expenses during the three months ended June 30, 2020 and 2019, respectively. In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 23% and 20% of our total costs and expenses during the six months ended June 30, 2020 and 2019, respectively.

Correspondingly, Martin Resource Management Corporation is one of our significant customers. Our sales to Martin Resource Management Corporation accounted for approximately 15% and 13% of our total revenues for the three months ended June 30, 2020 and 2019, respectively. Our sales to Martin Resource Management Corporation accounted for approximately 13% and 11% of our total revenues for both the six months ended June 30, 2020 and 2019, respectively.

For a more comprehensive discussion concerning the agreements that we have entered into with Martin Resource Management Corporation, please refer to "Item 13. Certain Relationships and Related Transactions, and Director Independence" set forth in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020.

Approval and Review of Related Party Transactions

If we contemplate entering into a transaction, other than a routine or in the ordinary course of business transaction, in which a related person will have a direct or indirect material interest, the proposed transaction is submitted for consideration to the board of directors of our general partner or to our management, as appropriate. If the board of directors of our general partner is involved in the approval process, it determines whether to refer the matter to the Conflicts Committee of our general partner's board of directors, as constituted under our limited partnership agreement. If a matter is referred to the Conflicts Committee, it obtains information regarding the proposed transaction from management and determines whether to engage independent legal counsel or an independent financial advisor to advise the members of the committee regarding the transaction. If the Conflicts Committee retains such counsel or financial advisor, it considers such advice and, in the case of a financial advisor, such advisor’s opinion as to whether the transaction is fair and reasonable to us and to our unitholders.

How We Evaluate Our Operations

Our management uses a variety of financial and operational measurements other than our financial statements prepared in accordance with U.S. GAAP to analyze our performance. These include: (1) net income before interest expense, income tax expense, and depreciation and amortization ("EBITDA"), (2) adjusted EBITDA and (3) distributable cash flow. Our management views these measures as important performance measures of core profitability for our operations and the ability to generate and distribute cash flow, and as key components of our internal financial reporting. We believe investors benefit from having access to the same financial measures that our management uses.

EBITDA and Adjusted EBITDA. Certain items excluded from EBITDA and adjusted EBITDA are significant components in understanding and assessing an entity's financial performance, such as cost of capital and historical costs of depreciable assets. We have included information concerning EBITDA and adjusted EBITDA because they provide investors and management with additional information to better understand the following: financial performance of our assets without regard to financing methods, capital structure or historical cost basis; our operating performance and return on capital as compared to those of other similarly situated entities; and the viability of acquisitions and capital expenditure projects. Our method of computing adjusted EBITDA may not be the same method used to compute similar measures reported by other entities. The economic substance behind our use of adjusted EBITDA is to measure the ability of our assets to generate cash sufficient to pay interest costs, support our indebtedness and make distributions to our unit holders.

Distributable Cash Flow. Distributable cash flow is a significant performance measure used by our management and by external users of our financial statements, such as investors, commercial banks and research analysts, to compare basic cash flows generated by us to the cash distributions we expect to pay our unitholders. Distributable cash flow is also an important financial measure for our unitholders since it serves as an indicator of our success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not we are generating cash flow at a level that can sustain or support an increase in our quarterly distribution rates. Distributable cash flow is also a quantitative standard used throughout the investment community with respect to publicly-traded partnerships because the value of a unit of such an entity is generally determined by the unit's yield, which in turn is based on the amount of cash distributions the entity pays to a unitholder.

EBITDA, adjusted EBITDA and distributable cash flow should not be considered alternatives to, or more meaningful than, net income, cash flows from operating activities, or any other measure presented in accordance with U.S. GAAP. Our method of computing these measures may not be the same method used to compute similar measures reported by other entities.

Reconciliation of Non-GAAP Financial Measures

The following table reconciles the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three and six months ended June 30, 2020 and 2019.

Reconciliation of EBITDA, Adjusted EBITDA, and Distributable Cash Flow


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(in thousands)						(in thousands)
Net income (loss)	$	(2,203)	$	(191,182)	$	6,612	$	(194,838)
Less: Loss from discontinued operations, net of income taxes	—		180,568		—		179,466
Income (loss) from continuing operations	(2,203)		(10,614)		6,612		(15,372)
Adjustments:
Interest expense, net	9,377		14,986		19,302		28,657
Income tax expense	790		639		1,137		1,335
Depreciation and amortization	15,343		15,087		30,582		29,988
EBITDA from Continuing Operations	23,307		20,098		57,633		44,608
Adjustments:
(Gain) loss on sale of property, plant and equipment, net	(15)		1,633		175		2,353
Unrealized mark-to-market on commodity derivatives	—		2,220		(669)		2,073
Transaction costs associated with acquisitions	—		40		—		224
Non-cash insurance related accruals	250		500		250		500
Lower of cost or market adjustments	—		303		335		303
Gain on repurchase of senior unsecured notes	—		—		(3,484)		—
Unit-based compensation	363		363		709		715
Adjusted EBITDA from Continuing Operations	23,905		25,157		54,949		50,776
Adjustments:
Interest expense, net	(9,377)		(14,986)		(19,302)		(28,657)
Income tax expense	(790)		(639)		(1,137)		(1,335)

Amortization of debt premium	(76)		(76)		(153)		(153)
Amortization of deferred debt issuance costs	499		1,583		991		2,478
Deferred income tax expense	732		487		1,018		856
Payments for plant turnaround costs	(81)		(915)		(231)		(4,742)
Maintenance capital expenditures	(2,280)		(2,628)		(5,306)		(6,487)
Distributable Cash Flow from Continuing Operations	$	12,532	$	7,983	$	30,829	$	12,736

Loss from discontinued operations, net of income taxes	$	—	$	(180,568)	$	—	$	(179,466)
Adjustments:
Depreciation and amortization	—		4,080		—		8,161
EBITDA from Discontinued Operations	—		(176,488)		—		(171,305)



Loss on sale of property, plant and equipment, net	—		178,781		—		178,781
Non-cash insurance related accruals	—		3,213		—		3,213
EBITDA and Adjusted EBITDA from Discontinued Operations	—		5,506		—		10,689
Maintenance capital expenditures	—		(576)		—		(912)
Distributable Cash Flow from Discontinued Operations	$	—	$	4,930	$	—	$	9,777

Results of Operations

The results of operations for the three and six months ended June 30, 2020 and 2019 have been derived from our consolidated and condensed financial statements.

We evaluate segment performance on the basis of operating income, which is derived by subtracting cost of products sold, operating expenses, selling, general and administrative expenses, and depreciation and amortization expense from revenues. The following table sets forth our operating revenues and operating income by segment for the three and six months ended June 30, 2020 and 2019. The results of operations for these interim periods are not necessarily indicative of the results of operations which might be expected for the entire year.

Our consolidated and condensed results of operations are presented on a comparative basis below. There are certain items of income and expense which we do not allocate on a segment basis. These items, including interest expense and indirect selling, general and administrative expenses, are discussed following the comparative discussion of our results within each segment.

Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019


	Operating Revenues		Intersegment Revenues Eliminations		Operating Revenues after Eliminations		Operating Income (Loss)		Operating Income (Loss) Intersegment Eliminations		Operating Income (Loss) after Eliminations
Three Months Ended June 30, 2020	(in thousands)
Terminalling and storage	$	46,976	$	(1,542)	$	45,434	$	3,352	$	(383)	$	2,969
Transportation	35,259		(3,774)		31,485		555		(2,633)		(2,078)
Sulfur services	33,420		—		33,420		7,385		1,429		8,814
Natural gas liquids	30,300		(1)		30,299		1,029		1,587		2,616
Indirect selling, general and administrative	—		—		—		(4,361)		—		(4,361)
Total	$	145,955	$	(5,317)	$	140,638	$	7,960	$	—	$	7,960


	Operating Revenues		Intersegment Revenues Eliminations		Operating Revenues after Eliminations		Operating Income (Loss)		Operating Income (Loss) Intersegment Eliminations		Operating Income (Loss) after Eliminations
Three Months Ended June 30, 2019	(in thousands)
Terminalling and storage	$	54,351	$	(1,603)	$	52,748	$	4,400	$	(146)	$	4,254
Transportation	47,233		(5,912)		41,321		3,314		(5,943)		(2,629)
Sulfur services	35,856		—		35,856		5,285		2,243		7,528
Natural gas liquids	57,398		—		57,398		(3,390)		3,846		456
Indirect selling, general and administrative	—		—		—		(4,599)		—		(4,599)
Total	$	194,838	$	(7,515)	$	187,323	$	5,010	$	—	$	5,010

Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019


	Operating Revenues		Intersegment Revenues Eliminations		Operating Revenues after Eliminations		Operating Income (Loss)		Operating Income (Loss) Intersegment Eliminations		Operating Income (Loss) after Eliminations
Six Months Ended June 30, 2020	(in thousands)
Terminalling and storage	$	98,110	$	(3,268)	$	94,842	$	4,381	$	(654)	$	3,727
Transportation	80,433		(10,007)		70,426		2,944		(10,043)		(7,099)
Sulfur services	61,756		(13)		61,743		18,681		3,991		22,672
Natural gas liquids	112,515		(5)		112,510		6,287		6,706		12,993
Indirect selling, general and administrative	—		—		—		(8,733)		—		(8,733)
Total	$	352,814	$	(13,293)	$	339,521	$	23,560	$	—	$	23,560


	Operating Revenues		Intersegment Revenues Eliminations		Operating Revenues after Eliminations		Operating Income (Loss)		Operating Income (Loss) Intersegment Eliminations		Operating Income (Loss) after Eliminations
Six Months Ended June 30, 2019	(in thousands)
Terminalling and storage	$	110,243	$	(3,324)	$	106,919	$	9,486	$	(417)	$	9,069
Transportation	92,419		(13,303)		79,116		6,844		(13,353)		(6,509)
Sulfur services	67,449		—		67,449		9,103		4,805		13,908
Natural gas liquids	173,872		—		173,872		(1,651)		8,965		7,314
Indirect selling, general and administrative	—		—		—		(9,166)		—		(9,166)
Total	$	443,983	$	(16,627)	$	427,356	$	14,616	$	—	$	14,616

Terminalling and Storage Segment

Comparative Results of Operations for the Three Months Ended June 30, 2020 and 2019


	Three Months Ended June 30,						Variance		Percent Change
	2020		2019
	(In thousands, except BBL per day)
Revenues:
Services	$	21,436	$	22,966	$	(1,530)	(7)	%
Products	25,540		31,385		(5,845)		(19)	%
Total revenues	46,976		54,351		(7,375)		(14)	%

Cost of products sold	22,697		27,497		(4,800)		(17)	%
Operating expenses	12,254		13,257		(1,003)		(8)	%
Selling, general and administrative expenses	1,398		1,378		20		1	%
Depreciation and amortization	7,272		7,826		(554)		(7)	%
	3,355		4,393		(1,038)		(24)	%
Other operating income (loss), net	(3)		7		(10)		(143)	%
Operating income	$	3,352	$	4,400	$	(1,048)	(24)	%

Shore-based throughput volumes (guaranteed minimum) (gallons)	20,000		20,000		—		—	%
Smackover refinery throughput volumes (guaranteed minimum BBL per day)	6,500		6,500		—		—	%

Services revenues. Services revenues decreased $1.5 million, of which $0.9 million was primarily a result of expiring capital recovery fees at our Smackover refinery and decreased fees related to a crude pipeline gathering rate adjustment combined with a $0.3 million decrease as a result of decreased lubricant delivery fees at our shore-based terminals. In addition, a decrease of $0.3 million was a result of decreased throughput rates at our specialty terminals.

Products revenues. A 15% decrease in sales volumes combined with a 3% decrease in average sales price at our blending and packaging facilities resulted in a $4.3 million decrease to products revenues. In addition, a 21% decrease in sales volumes combined with a 5% decrease in average sales price at our shore-based terminals resulted in a $1.7 million decrease to products revenues.

Cost of products sold. A 15% decrease in sales volumes combined with a 2% decrease in average cost per gallon at our blending and packaging facilities resulted in a $3.3 million decrease in cost of products sold. In addition, a 21% decrease in sales volumes combined with a 7% decrease in average cost per gallon at our shore-based terminals resulted in a $1.6 million decrease in cost of products sold.

Operating expenses. Operating expenses decreased $1.0 million which is primarily a result of decreased compensation expenses of $0.3 million, repairs and maintenance of $0.2 million and materials and supplies of $0.2 million.

Selling, general and administrative expenses. Selling, general and administrative expenses remained consistent.

Depreciation and amortization. The decrease in depreciation and amortization is the result of assets becoming fully depreciated.

Other operating income (loss), net. Other operating loss, net represents gains and losses from the disposition of property, plant and equipment.

Comparative Results of Operations for the Six Months Ended June 30, 2020 and 2019


	Six Months Ended June 30,						Variance		Percent Change
	2020		2019
	(In thousands, except BBL per day)
Revenues:
Services	$	43,603	$	47,766	$	(4,163)	(9)	%
Products	54,507		62,477		(7,970)		(13)	%
Total revenues	98,110		110,243		(12,133)		(11)	%

Cost of products sold	47,685		55,774		(8,089)		(15)	%
Operating expenses	25,205		26,610		(1,405)		(5)	%
Selling, general and administrative expenses	3,057		2,727		330		12	%
Depreciation and amortization	14,728		15,663		(935)		(6)	%
	7,435		9,469		(2,034)		(21)	%
Other operating income (loss), net	(3,054)		17		(3,071)		(18,065)	%
Operating income	$	4,381	$	9,486	$	(5,105)	(54)	%

Shore-based throughput volumes (guaranteed minimum) (gallons)	40,000		40,000		—		—	%
Smackover refinery throughput volumes (guaranteed minimum) (BBL per day)	6,500		6,500		—		—	%

Services revenues. Services revenue decreased $4.2 million, of which $1.8 million was primarily a result of decreased throughput fees at our shore-based terminals combined with a $1.8 million decrease as a result of expiring capital recovery fees at our Smackover refinery and decreased fees related to a crude pipeline gathering rate adjustment. In addition, a decrease of $0.6 million was a result of decreased throughput rates at our specialty terminals.

Products revenues. A 10% decrease in sales volumes combined with a 18% decrease in average sales price at our shore-based terminals resulted in a $4.6 million decrease in products revenues. In addition, a 7% decrease in sales volumes combined with a 1% decrease in average sales price at our blending and packaging facilities resulted in a $3.4 million decrease to products revenues.

Cost of products sold. A 10% decrease in sales volumes combined with a 19% decrease in average cost per gallon at our shore-based terminals resulted in a $4.5 million decrease in cost of products sold. In addition, a 7% decrease in sales volumes combined with a 3% decrease in average cost per gallon at our blending and packaging facilities resulted in a $3.6 million decrease in cost of products sold.

Operating expenses. Operating expenses decreased $1.4 million primarily as a result of decreased utilities of $0.4 million, materials and supplies of $0.3 million, chemicals of $0.3 million and compensation expense of $0.2 million across our terminals.

Selling, general and administrative expenses. Selling, general and administrative expenses increased primarily due to an increase in professional fees across our terminals.

Depreciation and amortization. The decrease in depreciation and amortization is primarily the result of assets becoming fully depreciated.

Other operating income (loss), net. Other operating income (loss), net represents gains and losses from the disposition of property, plant and equipment. For the six months ended June 30, 2020, other operating income (loss), net represents the impairment charge resulting from a decline in the fair value related to assets previously classified as held for sale.

Transportation Segment

Comparative Results of Operations for the Three Months Ended June 30, 2020 and 2019


	Three Months Ended June 30,						Variance		Percent Change
	2020		2019
	(In thousands)
Revenues	$	35,259	$	47,233	$	(11,974)	(25)	%
Operating expenses	28,331		36,512		(8,181)		(22)	%
Selling, general and administrative expenses	2,058		1,980		78		4	%


Depreciation and amortization	4,328		3,778		550		15	%
	542		4,963		(4,421)		(89)	%
Other operating income (loss), net	13		(1,649)		1,662		101	%
Operating income	$	555	$	3,314	$	(2,759)	(83)	%

Marine Transportation Revenues. Inland revenue decreased $2.3 million, primarily related to decreased utilization and transportation rates. In addition, offshore revenue decreased $0.5 million primarily due to a decrease in transportation rates. Additionally, ancillary revenue (primarily fuel) decreased $1.4 million.

Land Transportation Revenues. Freight revenue decreased $5.5 million. Miles decreased 23% resulting in a $6.1 million decrease. Offsetting this decrease, transportation rates increased 2% resulting in a $0.6 million increase. Additionally, fuel surcharge revenue decreased $2.3 million.

Operating expenses. The decrease in operating expenses is primarily a result of decreases in pass through expenses (primarily fuel) of $3.3 million, compensation expense of $3.6 million, and repairs and maintenance of $0.9 million.

Selling, general and administrative expenses. Selling, general and administrative expenses remained relatively consistent.

Depreciation and amortization. Depreciation and amortization increased as a result of recent capital expenditures offset by asset disposals.

Other operating income (loss), net. Other operating income (loss), net represents losses from the disposition of property, plant and equipment.

Comparative Results of Operations for the Six Months Ended June 30, 2020 and 2019


	Six Months Ended June 30,						Variance		Percent Change
	2020		2019
	(In thousands)
Revenues	$	80,433	$	92,419	$	(11,986)	(13)	%
Operating expenses	63,493		71,777		(8,284)		(12)	%
Selling, general and administrative expenses	4,193		4,065		128		3	%


Depreciation and amortization	8,608		7,348		1,260		17	%
	$	4,139	$	9,229	$	(5,090)	(55)	%
Other operating loss, net	(1,195)		(2,385)		1,190		50	%
Operating income	$	2,944	$	6,844	$	(3,900)	(57)	%

Marine Transportation Revenues. Inland revenue decreased $1.4 million, primarily related to decreased tows. In addition, offshore revenue decreased $0.7 million primarily due to a decrease in transportation rates. Additionally, ancillary revenue (primarily fuel) decreased $1.1 million.

Land Transportation Revenues. Freight revenue decreased $6.1 million primarily due to a 12% decrease in miles. Additionally, fuel surcharge decreased $2.8 million.

Operating expenses. The decrease in operating expenses is primarily a result of decreases in pass through expenses (primarily fuel) of $3.6 million, compensation expense of $3.4 million, lease expense of $0.9 million, and repairs and maintenance of $0.9 million.

Selling, general and administrative expenses. Selling, general and administrative expenses remained relatively consistent.

Depreciation and amortization. Depreciation and amortization increased as a result of recent capital expenditures, offset by asset disposals.

Other operating loss, net. Other operating loss, net represents losses from the disposition of property, plant and equipment.

Sulfur Services Segment

Comparative Results of Operations for the Three Months Ended June 30, 2020 and 2019


	Three Months Ended June 30,						Variance		Percent Change
	2020		2019
	(In thousands)
Revenues:
Services	$	2,914	$	2,858	$	56	2	%
Products	30,506		32,998		(2,492)		(8)	%
Total revenues	33,420		35,856		(2,436)		(7)	%

Cost of products sold	18,601		23,676		(5,075)		(21)	%
Operating expenses	3,142		2,789		353		13	%
Selling, general and administrative expenses	1,166		1,251		(85)		(7)	%
Depreciation and amortization	3,131		2,854		277		10	%
	7,380		5,286		2,094		40	%
Other operating income (loss), net	5		(1)		6		600	%
Operating income	$	7,385	$	5,285	$	2,100	40	%

Sulfur (long tons)	166		182		(16)		(9)	%
Fertilizer (long tons)	91		88		3		3	%
Total sulfur services volumes (long tons)	257		270		(13)		(5)	%

Services revenues. Services revenues increased slightly as a result of renegotiation of contract terms effective January 2020.

Products revenues. Products revenues decreased $1.0 million as a result of a 3% decrease in average sales price. A 5% decrease in sales volumes, primarily attributable to a 9% decrease in sulfur volumes, resulted in an additional decrease of $1.5 million.

Cost of products sold. A 17% decrease in average cost of products sold per ton reduced our cost of products sold by $4.1 million. A 5% decrease in sales volumes decreased our cost of products sold by $1.0 million. Margin per ton increased $11.80, or 34%.

Operating expenses. Our operating expenses increased primarily as a result of a $0.3 million increase in insurance premiums and claims. An additional $0.2 million increase related to outside towing offset by a $0.2 million decrease in marine fuel and lube.

Selling, general and administrative expenses. Selling, general and administrative expenses decreased a combined $0.1 million due to decreased compensation expense and professional fees.

Depreciation and amortization. Depreciation and amortization increased as a result of recent capital expenditures.

Other operating income (loss), net. Other operating income (loss), net represents gains and losses from the disposition of property, plant and equipment.

Comparative Results of Operations for the Six Months Ended June 30, 2020 and 2019


	Six Months Ended June 30,						Variance		Percent Change
	2020		2019
	(In thousands)
Revenues:
Services	$	5,829	$	5,717	$	112	2	%
Products	55,927		61,732		(5,805)		(9)	%
Total revenues	61,756		67,449		(5,693)		(8)	%

Cost of products sold	35,405		45,242		(9,837)		(22)	%
Operating expenses	6,052		4,952		1,100		22	%
Selling, general and administrative expenses	2,369		2,429		(60)		(2)	%
Depreciation and amortization	6,025		5,722		303		5	%
	11,905		9,104		2,801		31	%
Other operating income (loss), net	6,776		(1)		6,777		677,700	%
Operating income	$	18,681	$	9,103	$	9,578	105	%

Sulfur (long tons)	349		291		58		20	%
Fertilizer (long tons)	165		155		10		6	%
Total sulfur services volumes (long tons)	514		446		68		15	%

Services revenues. Services revenues increased $0.1 million as a result of renegotiation of contract terms effective January 2020.

Products revenues. Products revenue decreased $13.2 million as a result of a 21% decrease in average sales price. A 15% increase in sales volumes, primarily attributable to a 20% increase in sulfur volumes, resulted in an offsetting increase of $7.4 million.

Cost of products sold. A 32% decrease in average cost of products sold per ton reduced cost of products sold by $14.5 million. A 15% increase in sales volumes resulted in an offsetting increase in cost of products sold of $4.7 million. Margin per ton increased $2.95, or 8%.

Operating expenses. Operating expenses increased as a result of a $0.4 million increase in insurance premiums and claims, a $0.4 million increase in outside towing, a $0.2 million increase in harbor and agency fees and a $0.1 million increase in repairs and maintenance expense.

Selling, general and administrative expenses. Selling, general and administrative expenses decreased slightly due to a decrease in professional fees.

Depreciation and amortization. Depreciation and amortization increased as a result of recent capital expenditures.

Other operating income (loss), net. Other operating income, net increased $2.7 million as a result of business interruption recoveries related to the Neches ship-loader insurance claim received in the first quarter of 2020. An additional $4.1 million increase is related to a net gain from the disposition of property, plant and equipment.

Natural Gas Liquids Segment

Comparative Results of Operations for the Three Months Ended June 30, 2020 and 2019


	Three Months Ended June 30,						Variance		Percent Change
	2020		2019
	(In thousands)
Products Revenues	$	30,300	$	57,398	$	(27,098)	(47)	%
Cost of products sold	26,579		57,392		(30,813)		(54)	%
Operating expenses	1,150		1,680		(530)		(32)	%
Selling, general and administrative expenses	930		1,097		(167)		(15)	%
Depreciation and amortization	612		629		(17)		(3)	%
	1,029		(3,400)		4,429		130	%
Other operating income (loss), net	—		10		(10)		(100)	%
Operating income (loss)	$	1,029	$	(3,390)	$	4,419	130	%

NGL sales volumes (Bbls)	1,698		1,457		241		17	%

Products Revenues. Our average sales price per barrel decreased $21.55, or 55%, resulting in a decrease to revenues of $31.4 million. The decrease in average sales price per barrel was a result of a decrease in market prices. Sales volumes increased 17%, increasing revenues by $4.3 million.

Cost of products sold. Our average cost per barrel decreased $23.74, or 60%, decreasing cost of products sold by $34.6 million. The decrease in average cost per barrel was a result of a decrease in market prices. The increase in sales volume of 17% resulted in a $3.8 million increase to cost of products sold. Our margins increased $2.19 per barrel, or $3.7 million during the period.

Operating expenses. Operating expenses decreased $0.5 million related to the divestiture of retail propane assets and the elimination of the associated expenses.

Selling, general and administrative expenses. Selling, general and administrative expenses decreased primarily due to decreased compensation expense.

Depreciation and amortization. Depreciation and amortization remained relatively consistent.

Other operating income, net. Other operating income, net represents gains and losses from the disposition of property, plant and equipment.

Comparative Results of Operations for the Six Months Ended June 30, 2020 and 2019


	Six Months Ended June 30,						Variance		Percent Change
	2020		2019
	(In thousands)
Products Revenues	$	112,515	$	173,872	$	(61,357)	(35)	%
Cost of products sold	100,839		168,701		(67,862)		(40)	%
Operating expenses	2,089		3,386		(1,297)		(38)	%
Selling, general and administrative expenses	2,077		2,197		(120)		(5)	%
Depreciation and amortization	1,221		1,255		(34)		(3)	%
	6,289		(1,667)		7,956		477	%
Other operating income (loss), net	(2)		16		(18)		(113)	%
Operating income (loss)	$	6,287	$	(1,651)	$	7,938	481	%

NGL sales volumes (Bbls)	4,143		4,364		(221)		(5)	%

Products Revenues. Our average sales price per barrel decreased $12.68, or 32%, resulting in a decrease to revenues of $55.4 million. The decrease in average sales price per barrel was a result of a decrease in market prices. Sales volumes decreased 5%, decreasing revenues by $6.0 million.

Cost of products sold. Our average cost per barrel decreased $14.32, or 37%, decreasing cost of products sold by $62.5 million. The decrease in average cost per barrel was a result of a decrease in market prices. The decrease in sales volume of 5% resulted in a $5.4 million decrease to cost of products sold. Our margins increased $1.63 per barrel, or $6.5 million, during the period.

Operating expenses. Operating expenses decreased $1.3 million related to the divestiture of assets and the elimination of the associated expenses.

Selling, general and administrative expenses. Selling, general and administrative expenses remained relatively consistent.

Depreciation and amortization. Depreciation and amortization remained relatively consistent.

Other operating income (loss), net. Other operating income, net represents gains and losses from the disposition of property, plant and equipment.

Interest Expense, Net

Comparative Components of Interest Expense, Net for the Three Months Ended June 30, 2020 and 2019


	Three Months Ended June 30,						Variance		Percent Change
	2020		2019
	(In thousands)
Revolving loan facility	$	1,720	$	6,142	$	(4,422)	(72)	%
7.25% Senior notes	6,679		6,850		(171)		(2)	%
Amortization of deferred debt issuance costs	499		1,583		(1,084)		(68)	%
Amortization of debt discount	(76)		(76)		—		—	%
Other	475		379		96		25	%
Finance leases	85		186		(101)		(54)	%
Capitalized interest	(5)		—		(5)
Interest income	—		(78)		78		100	%
Total interest expense, net	$	9,377	$	14,986	$	(5,609)	(37)

Comparative Components of Interest Expense, Net for the Six Months Ended June 30, 2020 and 2019


	Six Months Ended June 30,						Variance		Percent Change
	2020		2019
	(In thousands)
Revolving loan facility	$	4,164	$	11,790	$	(7,626)	(65)	%
7.25% Senior notes	13,210		13,324		(114)		(1)	%
Amortization of deferred debt issuance costs	991		2,478		(1,487)		(60)	%
Amortization of debt premium	(153)		(153)		—		—	%
Other	900		941		(41)		(4)	%
Finance leases	199		369		(170)		(46)	%
Capitalized interest	(9)		(2)		(7)		(350)	%
Interest income	—		(90)		90		100	%
Total interest expense, net	$	19,302	$	28,657	$	(9,355)	(33)	%

Indirect Selling, General and Administrative Expenses


	Three Months Ended June 30,						Variance		Percent Change		Six Months Ended June 30,						Variance	Percent Change
	2020		2019								2020		2019
	(In thousands)												(In thousands)
Indirect selling, general and administrative expenses	$	4,361	$	4,599	$	(238)	(5)	%	$	8,733	$	9,166	$	(433)	(5)	%

Indirect selling, general and administrative expenses decreased for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to decreased professional fees. Indirect selling, general and administrative expenses decreased for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to transaction expenses incurred in the first quarter of 2019 related to the acquisition of MTI of $0.2 million and decreased professional fees of $0.2 million.

Martin Resource Management Corporation allocates to us a portion of its indirect selling, general and administrative expenses for services such as accounting, legal, treasury, clerical, billing, information technology, administration of insurance, engineering, general office expense and employee benefit plans and other general corporate overhead functions we share with Martin Resource Management Corporation retained businesses. This allocation is based on the percentage of time spent by Martin Resource Management Corporation personnel that provide such centralized services. GAAP also permits other methods for

allocation of these expenses, such as basing the allocation on the percentage of revenues contributed by a segment. The allocation of these expenses between Martin Resource Management Corporation and us is subject to a number of judgments and estimates, regardless of the method used. We can provide no assurances that our method of allocation, in the past or in the future, is or will be the most accurate or appropriate method of allocation for these expenses. Other methods could result in a higher allocation of selling, general and administrative expense to us, which would reduce our net income.

Under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporation for indirect general and administrative and corporate overhead expenses. The Conflicts Committee of our general partner approved the following reimbursement amounts during the three and six months ended June 30, 2020 and 2019:


	Three Months Ended June 30,						Variance		Percent Change		Six Months Ended June 30,						Variance	Percent Change
	2020		2019								2020		2019
	(In thousands)												(In thousands)
Conflicts Committee approved reimbursement amount	$	4,103	$	4,164	$	(61)	(1)	%	$	8,261	$	8,328	$	(67)	(1)	%

The amounts reflected above represent our allocable share of such expenses. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually.

Liquidity and Capital Resources

General

Our primary sources of liquidity to meet operating expenses, service our indebtedness, fund capital expenditures and pay distributions to our unitholders have historically been cash flows generated by our operations, borrowings under our revolving credit facility and access to debt and equity capital markets, both public and private. Set forth below is a description of our cash flows for the periods indicated.

Cash Flows - Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

The following table details the cash flow changes between the six months ended June 30, 2020 and 2019:


	Six Months Ended June 30,						Variance		Percent Change
	2020		2019
	(In thousands)
Net cash provided by (used in):
Operating activities	$	44,626	$	32,513	$	12,113	37	%
Investing activities	(13,147)		167,250		(180,397)		(108)	%
Financing activities	(34,283)		(197,542)		163,259		83	%
Net increase (decrease) in cash and cash equivalents	$	(2,804)	$	2,221	$	(5,025)	(226)	%

Net cash provided by operating activities. The increase in net cash provided by operating activities for the six months ended June 30, 2020 includes an increase in operating results of $22.0 million, a favorable variance in working capital of $5.8 million, and a favorable variance in other non-current assets and liabilities of $1.2 million. Offsetting this increase was a $7.8 million decrease in net cash received from discontinued operating activities and a $9.1 million decrease in other non-cash charges.

Net cash provided by (used in) investing activities. Net cash provided by (used in) investing activities for the six months ended June 30, 2020 decreased $180.4 million. A decrease of $23.7 million in cash used was a result of assets acquired from MTI in January of 2019. Offsetting this decrease was $3.7 million in proceeds received as a result of higher sales of property, plant and equipment in 2020 as well as $1.8 million in proceeds received from the involuntary conversion of property, plant and equipment. Cash received from discontinued investing activities decreased $209.2 million. An increase in cash used of $0.4 million resulted from higher payments for capital expenditures and plant turnaround costs in 2020.

Net cash used in financing activities. Net cash used in financing activities for the six months ended June 30, 2020 decreased primarily as a result of a $102.4 million decrease in cash used related to excess purchase price over the carrying value of acquired assets in common control transactions during 2019. Additionally, net payments of long-term borrowings decreased $35.6 million and cash distributions paid decreased $24.5 million.

Total Contractual Obligations

A summary of our total contractual cash obligations as of June 30, 2020, is as follows:


	Payments due by period
Type of Obligation	Total Obligation		Less than One Year		1-3 Years		3-5 Years		Due Thereafter
Revolving credit facility (1)	$	181,000	$	—	$	—	$	181,000	$	—
7.25% senior unsecured notes, due 2021	364,456		364,456		—		—		—
Throughput commitment	6,140		5,852		288		—		—
Operating leases	29,166		8,964		10,786		3,097		6,319
Finance lease obligations	4,336		3,931		405		—		—
Interest payable on finance lease obligations	132		113		19		—		—
Interest payable on fixed long-term debt obligations	16,938		16,938		—		—		—
Total contractual cash obligations	$	602,168	$	400,254	$	11,498	$	184,097	$	6,319

(1) The revolving credit facility matures on (a) August 31, 2023, or (b) (i) August 19, 2020 if either (x) more than $36.5 million of the 2021 Notes remain outstanding after completion of the Exchange Offer or (y) the Exchange Offer has not been completed by August 15, 2020 and the Partnership has not commenced the chapter 11 proceedings contemplated by the Plan prior to August 19, 2020 or (ii) October 16, 2020 if the Partnership commences such chapter 11 proceedings and the Plan is not effective by October 16, 2020. As of the Early Participation Date, the Partnership received sufficient 2021 Notes tendered such that the Minimum Participation Condition has been satisfied and, subject to satisfaction of other customary closing conditions, the Exchange offer and Cash Tender Offer will be consummated on or about August 12, 2020 and the Plan will not be filed.

The interest payable under our credit facility is not reflected in the above table because such amounts depend on the outstanding balances and interest rates, which vary from time to time.

Letters of Credit. At June 30, 2020, we had outstanding irrevocable letters of credit in the amount of $21.7 million, which were issued under our revolving credit facility.

Off Balance Sheet Arrangements. We do not have any off-balance sheet financing arrangements.

Description of Our Long-Term Debt

2021 Senior Notes

For a description of our 7.25% senior unsecured notes due 2021, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Description of Our Long-Term Debt" in our Annual Report on Form 10-K for the year ended December 31, 2019, as amended.

Revolving Credit Facility

At June 30, 2020, we maintained a $400.0 million revolving credit facility. The revolving credit facility matures on August 31, 2023, or August 19, 2020 if either (x) more than $36.5 million of the 2021 Notes remain outstanding after completion of the Exchange Offer or (y) the Exchange Offer has not been completed by August 15, 2020 and the Partnership has not commenced the chapter 11 proceedings contemplated by the Plan prior to August 19, 2020 or (ii) October 16, 2020 if the Partnership commences such chapter 11 proceedings and the Plan is not effective by October 16, 2020. As of the Early Participation Date, the Partnership received sufficient 2021 Notes tendered such that the Minimum Participation Condition has been satisfied and, subject to satisfaction of other customary closing conditions, the Exchange offer and Cash Tender Offer will be consummated on or about August 12, 2020 and the Plan will not be filed.

As of June 30, 2020, we had $181.0 million outstanding under the revolving credit facility and $21.7 million of outstanding irrevocable letters of credit, leaving a maximum amount available to be borrowed under our credit facility for future revolving credit borrowings and letters of credit of $197.3 million. After giving effect to our then current borrowings, outstanding letters of credit and the financial covenants contained in our revolving credit facility, we had the ability to borrow approximately $33.7 million in additional amounts thereunder as of June 30, 2020.

Upon the effectiveness of the Credit Facility Amendment, the aggregate amount of commitments under the revolving credit facility will be reduced from $400 million to $300 million.

The revolving credit facility is used for ongoing working capital needs and general partnership purposes, and to finance permitted investments, acquisitions and capital expenditures. During the six months ended June 30, 2020, the level of outstanding draws on our credit facility has ranged from a low of $170.0 million to a high of $223.0 million.

The credit facility is guaranteed by substantially all of our subsidiaries. Obligations under the credit facility are secured by first priority liens on substantially all of our assets and those of the guarantors, including, without limitation, inventory, accounts receivable, bank accounts, marine vessels, equipment, fixed assets and the interests in our subsidiaries.

We may prepay all amounts outstanding under the credit facility at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements. The credit facility requires mandatory prepayments of amounts outstanding thereunder with excess cash that exceeds $25.0 million and the net proceeds of certain asset sales, equity issuances and debt incurrences. After giving effect to the Credit Facility Amendment, if we sell assets and receive net

cash proceeds in excess of $25.0 million, the commitments of the lenders under the revolving credit facility will be reduced by $25.0 million.

Indebtedness under the credit facility bears interest at our option at the Eurodollar Rate (the British Bankers Association LIBOR Rate) plus an applicable margin or the Base Rate (the highest of the Federal Funds Rate plus 0.50%, the 30-day Eurodollar Rate plus 1.0%, or the administrative agent’s prime rate) plus an applicable margin. We pay a per annum fee on all letters of credit issued under the credit facility, and we pay a commitment fee per annum on the unused revolving credit availability under the credit facility. The letter of credit fee, the commitment fee and the applicable margins for our interest rate vary quarterly based on our leverage ratio (as defined in the credit facility, being generally computed as the ratio of total funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) and are as follows as of June 30, 2020:


Leverage Ratio	Base Rate Loans		Eurodollar Rate Loans		Letters of Credit
Less than 3.00 to 1.00	1.25	%	2.25	%	2.25	%
Greater than or equal to 3.00 to 1.00 and less than 3.50 to 1.00	1.50	%	2.50	%	2.50	%
Greater than or equal to 3.50 to 1.00 and less than 4.00 to 1.00	1.75	%	2.75	%	2.75	%
Greater than or equal to 4.00 to 1.00 and less than 4.50 to 1.00	2.00	%	3.00	%	3.00	%
Greater than or equal to 4.50 to 1.00 and less than 5.00 to 1.00	2.25	%	3.25	%	3.25	%
Greater than or equal to 5.00 to 1.00	2.50	%	3.50	%	3.50	%

At June 30, 2020, the applicable margin for revolving loans that are LIBOR loans ranges from 2.25% to 3.50% and the applicable margin for revolving loans that are base prime rate loans ranges from 1.25% to 2.50%. The applicable margin for LIBOR borrowings at June 30, 2020 is 3.25%. After giving effect to the Credit Facility Amendment, the applicable margin for revolving loans that are LIBOR loans will range from 2.75% to 4.00%, with a 1.0% floor for LIBOR, and the applicable margin for revolving loans that are base prime rate loans will range from 1.75% to 3.00%.

The credit facility includes financial covenants that are tested on a quarterly basis, based on the rolling four quarter period that ends on the last day of each fiscal quarter.

In addition, the credit facility contains various covenants, which, among other things, limit our and our subsidiaries’ ability to: (i) grant or assume liens; (ii) make investments (including investments in our joint ventures) and acquisitions; (iii) enter into certain types of hedging agreements; (iv) incur or assume indebtedness; (v) sell, transfer, assign or convey assets; (vi) repurchase our equity, make distributions (including a limit on our ability to make quarterly distributions to unitholders in excess of $0.005 per unit unless our total leverage ratio is below 3.75x) and certain other restricted payments; (vii) change the nature of our business; (viii) engage in transactions with affiliates; (ix) enter into certain burdensome agreements; (x) make certain amendments to the Omnibus Agreement and our material agreements; (xi) make capital expenditures; and (xii) permit our joint ventures to incur indebtedness or grant certain liens.

The credit facility contains customary events of default, including, without limitation: (i) failure to pay any principal, interest, fees, expenses or other amounts when due; (ii) failure to meet the quarterly financial covenants; (iii) failure to observe any other agreement, obligation, or covenant in the credit facility or any related loan document, subject to cure periods for certain failures; (iv) the failure of any representation or warranty to be materially true and correct when made; (v) our, or any of our subsidiaries’ default under other indebtedness that exceeds a threshold amount; (vi) bankruptcy or other insolvency events involving us or any of our subsidiaries; (vii) judgments against us or any of our subsidiaries, in excess of a threshold amount; (viii) certain ERISA events involving us or any of our subsidiaries, in excess of a threshold amount; (ix) a change in control (as defined in the credit facility); and (x) the invalidity of any of the loan documents or the failure of any of the collateral documents to create a lien on the collateral.

The credit facility also contains certain default provisions relating to Martin Resource Management Corporation. If Martin Resource Management Corporation no longer controls our general partner, the lenders under the credit facility may declare all amounts outstanding thereunder immediately due and payable. In addition, an event of default by Martin Resource Management Corporation under its credit facility could independently result in an event of default under our credit facility if it is deemed to have a material adverse effect on us.

If an event of default relating to bankruptcy or other insolvency events occurs with respect to us or any of our subsidiaries, all indebtedness under our credit facility will immediately become due and payable. If any other event of default

exists under our credit facility, the lenders may terminate their commitments to lend us money, accelerate the maturity of the indebtedness outstanding under the credit facility and exercise other rights and remedies. In addition, if any event of default exists under our credit facility, the lenders may commence foreclosure or other actions against the collateral.

Capital Resources and Liquidity

Historically, we have generally satisfied our working capital requirements and funded our debt service obligations and capital expenditures with cash generated from operations and borrowings under our revolving credit facility.

At June 30, 2020, we had cash and cash equivalents of $0.1 million and available borrowing capacity of $33.7 million under our revolving credit facility with $181.0 million of borrowings outstanding. Our revolving credit facility matures on August 31, 2023, or August 19, 2020 if either (x) more than $36.5 million of the 2021 Notes remain outstanding after completion of the Exchange Offer or (y) the Exchange Offer has not been completed by August 15, 2020 and the Partnership has not commenced the chapter 11 proceedings contemplated by the Plan prior to August 19, 2020 or (ii) October 16, 2020 if the Partnership commences such chapter 11 proceedings and the Plan is not effective by October 16, 2020. As of the Early Participation Date, the Partnership received sufficient 2021 Notes tendered such that the Minimum Participation Condition has been satisfied and, subject to satisfaction of other customary closing conditions, the Exchange offer and Cash Tender Offer will be consummated on or about August 12, 2020 and the Plan will not be filed.

Following the successful refinancing of the 2021 Notes, we expect that our primary sources of liquidity to meet operating expenses, service our indebtedness, pay distributions to our unitholders and fund capital expenditures will be provided by cash flows generated by our operations, borrowings under our revolving credit facility and access to the debt and equity capital markets. Our ability to generate cash from operations will depend upon our future operating performance, which is subject to certain risks. For a discussion of such risks, please read "Item 1A. Risk Factors" of our Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020, as updated and supplemented in Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020 and Part II, Item 1A of this Quarterly Report on Form 10-Q, as may be further updated and supplemented from time to time in our future Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. In addition, due to the covenants in our revolving credit facility, our financial and operating performance impacts the amount we are permitted to borrow under that facility.

To address these challenges, since July of 2018, we have taken a number of strategic actions to strengthen our balance sheet and reduce leverage, such as asset dispositions and acquisitions, reductions in the distributions payable to our unitholders and efforts to focus our growth on business segments with a stronger economic outlook. For example, in an effort to preserve liquidity, we recently reduced the quarterly cash distribution per common unit to $0.0625 beginning with the distribution payable for the fourth quarter of 2019. We expect this distribution reduction, along with the reduction announced in 2019, to result in approximately $68.2 million in cash we can retain annually for debt reduction and investment in higher return opportunities.

If we are unable to refinance the 2021 Notes in accordance with the Credit Facility Amendment either via the Exchange Offer or the Plan, in each case as contemplated by the Restructuring Support Agreement, we would be in default under our revolving credit facility. An event of default under our revolving credit facility would allow the lenders to declare the balance outstanding thereunder due and payable in full, which could trigger cross-defaults under other agreements, which could also result in the acceleration of those obligations by the counterparties to those agreements.

We are in compliance with all debt covenants as of June 30, 2020 and expect to be in compliance for the next twelve months provided the Partnership successfully completes the refinancing of the 2021 Notes.

Interest Rate Risk

We are subject to interest rate risk on our credit facility due to the variable interest rate and may enter into interest rate swaps to reduce this variable rate risk.

Seasonality

A substantial portion of our revenues is dependent on sales prices of products, particularly NGLs and fertilizers, which fluctuate in part based on winter and spring weather conditions. The demand for NGLs is strongest during the winter heating season and the refinery blending season. The demand for fertilizers is strongest during the early spring planting season. However, our Terminalling and Storage and Transportation business segments and the molten sulfur business are typically not impacted by seasonal fluctuations and a significant portion of our net income is derived from our Terminalling and Storage,

Sulfur Services and Transportation business segments. Further, extraordinary weather events, such as hurricanes, have in the past, and could in the future, impact our Terminalling and Storage and Transportation business segments.

Impact of Inflation

Inflation did not have a material impact on our results of operations for the six months ended June 30, 2020 or 2019. Although the impact of inflation has been insignificant in recent years, it is still a factor in the U.S. economy and may increase the cost to acquire or replace property, plant and equipment. It may also increase the costs of labor and supplies. In the future, increasing energy prices could adversely affect our results of operations. Diesel fuel, natural gas, chemicals and other supplies are recorded in operating expenses. An increase in price of these products would increase our operating expenses which could adversely affect net income. We cannot provide assurance that we will be able to pass along increased operating expenses to our customers.

Environmental Matters

Our operations are subject to environmental laws and regulations adopted by various governmental authorities in the jurisdictions in which these operations are conducted. We incurred no material environmental costs, liabilities or expenditures to mitigate or eliminate environmental contamination during the six months ended June 30, 2020 or 2019.


Item 3.			Quantitative and Qualitative Disclosures about Market Risk

Commodity Risk. The Partnership from time to time uses derivatives to manage the risk of commodity price fluctuation. Commodity risk is the adverse effect on the value of a liability or future purchase that results from a change in commodity price. We monitor and manage the commodity market risk associated with potential commodity risk exposure. In addition, we focus on utilizing counterparties for these transactions whose financial condition is appropriate for the credit risk involved in each specific transaction. There were no open hedging arrangements as of June 30, 2020.

Interest Rate Risk. We are exposed to changes in interest rates as a result of our credit facility, which had a weighted-average interest rate of 3.44% as of June 30, 2020. Based on the amount of unhedged floating rate debt owed by us on June 30, 2020, the impact of a 100 basis point increase in interest rates on this amount of debt would result in an increase in interest expense and a corresponding decrease in net income of approximately $1.8 million annually.

We are not exposed to changes in interest rates with respect to our 2021 Notes as these obligations are fixed rate. The estimated fair value of the 2021 Notes was approximately $294.7 million as of June 30, 2020, based on market prices of similar debt at June 30, 2020. Market risk is estimated as the potential decrease in fair value of our long-term debt resulting from a hypothetical increase of a 100 basis point increase in interest rates. Such an increase in interest rates would result in approximately a $1.5 million decrease in the fair value of our long-term debt at June 30, 2020.


Item 4.			Controls and Procedures

Evaluation of disclosure controls and procedures. In accordance with Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of our general partner, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of our general partner concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this report, to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in our internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION


Item 1.			Legal Proceedings

From time to time, we are subject to certain legal proceedings claims and disputes that arise in the ordinary course of our business. Although we cannot predict the outcomes of these legal proceedings, we do not believe these actions, in the aggregate, will have a material adverse impact on our financial position, results of operations or liquidity. Information regarding legal proceedings is set forth in Note 14 in Part I of this Form 10-Q.


Item 1A.			Risk Factors

Except as stated below, there have been no material changes to the Partnership's risk factors since our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020, as updated and supplemented in Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020.

The Exchange Offer and Consent Solicitation may not be consummated. If the Exchange Offer is unsuccessful, we will file for bankruptcy.

Our ability to consummate the Exchange Offer is conditioned on the satisfaction or, where possible, waiver of the conditions set forth in the Offering Memorandum for the Exchange Offer. Although we satisfied the Minimum Tender Condition, there is no assurance that such other conditions will be satisfied. In the event that we are unable to consummate the Exchange Offer, we will file for bankruptcy. Bankruptcy, whether or not voluntary, would trigger an automatic default under our revolving credit facility and the indenture governing our 2021 Notes. In the event the Restructuring Support Agreement is terminated, our debtholders could, after receiving appropriate relief from the bankruptcy court, foreclose on the collateral under these agreements. An automatic default under our revolving credit facility or indenture governing our 2021 Notes or the termination of the Restructuring Support Agreement would have a material negative effect on our business, ongoing operations and reputation. In a foreclosure, there may be insufficient collateral to satisfy claims of our unsecured creditors. Moreover, the bankruptcy court could, upon a showing of cause, convert a chapter 11 reorganization into a chapter 7 liquidation, which would likely result in significantly smaller distributions to our creditors.

The Plan may have a material adverse effect on our operations.

In the event that we are unable to consummate the Exchange Offer, we believe that Chapter 11 Cases filed with the vote of more than 50% in number of holders of the 2021 Notes that cast ballots with respect to the Plan (the "Requisite Acceptance Vote") could be resolved expeditiously with minimal disruption to our business. Indeed, upon a commencement of the Chapter 11 Cases, we would attempt to convey the benefits of the Plan and the Chapter 11 Cases to our existing and potential customers, employees, creditors, equityholders and other stakeholders. If the Chapter 11 Cases are necessary, we believe that consummation of the Plan would improve our consolidated balance sheet and capital structure by extending the maturity of certain of our debt, and minimizing the business disruptions and potential customer defections by limiting uncertainty as to our viability as a going concern and the period of time during which the we are subject to such uncertainty. However, our solicitation of votes to accept the Plan (the "Plan Solicitation") and any subsequent commencement of Chapter 11 Cases could adversely affect the relationships between us and our existing and potential customers, employees, creditors and other stakeholders and subject us to other direct and indirect adverse consequences. For example:

•customers may decrease or eliminate business with us;

•employees could be distracted from performance of their duties, or more easily attracted to other career opportunities;

•it may become more difficult to retain, attract or replace key employees;

•vendors and suppliers could restrict or eliminate trade credit;

•certain of our suppliers may demand deposits or other security; and

•if we were not able to confirm and implement a plan of reorganization, we may be forced to liquidate under Chapter 7 of the Bankruptcy Code.

In addition, these factors could adversely affect our ability to obtain confirmation of the Plan.


Item 6.			Exhibits

The information required by this Item 6 is set forth in the Index to Exhibits accompanying this quarterly report and is incorporated herein by reference.

INDEX TO EXHIBITS


Exhibit Number						Exhibit Name

3.1						Certificate of Limited Partnership of Martin Midstream Partners L.P. (the "Partnership"), dated June 21, 2002 (filed as Exhibit 3.1 to the Partnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.2						Second Amended and Restated Agreement of Limited Partnership of the Partnership, dated November 25, 2009 (filed as Exhibit 10.1 to the Partnership's Amendment to Current Report on Form 8-K/A (SEC File No. 000-50056), filed January 19, 2010, and incorporated herein by reference).
3.3						Amendment No. 2 to the Second Amended and Restated Agreement of Limited Partnership of the Partnership dated January 31, 2011 (filed as Exhibit 3.1 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed February 1, 2011, and incorporated herein by reference).
3.4						Amendment No. 3 to the Second Amended and Restated Agreement of Limited Partnership of the Partnership dated October 2, 2012 (filed as Exhibit 10.5 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed October 9, 2012, and incorporated herein by reference).
3.5						Certificate of Limited Partnership of Martin Operating Partnership L.P. (the "Operating Partnership"), dated June 21, 2002 (filed as Exhibit 3.3 to the Partnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.6						Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated November 6, 2002 (filed as Exhibit 3.2 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed November 19, 2002, and incorporated herein by reference).
3.7						Certificate of Formation of Martin Midstream GP LLC (the "General Partner"), dated June 21, 2002 (filed as Exhibit 3.5 to the Partnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.8						Amended and Restated Limited Liability Company Agreement of the General Partner, dated August 30, 2013 (filed as Exhibit 3.1 to the Partnership's Current Report on Form 8-K (Reg. No. 000-50056), filed September 3, 2013, and incorporated herein by reference).
3.9						Certificate of Formation of Martin Operating GP LLC (the "Operating General Partner"), dated June 21, 2002 (filed as Exhibit 3.7 to the Partnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.10						Limited Liability Company Agreement of the Operating General Partner, dated June 21, 2002 (filed as Exhibit 3.8 to the Partnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.11						Certificate of Formation of Arcadia Gas Storage, LLC, dated June 26, 2006 (filed as Exhibit 3.11 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.12						Company Agreement of Arcadia Gas Storage, LLC, dated December 27, 2006 (filed as Exhibit 3.12 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.13						Amendment to the Company Agreement of Arcadia Gas Storage, LLC, dated September 5, 2014 (filed as Exhibit 3.13 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.14						Certificate of Formation of Cadeville Gas Storage LLC, dated May 23, 2008 (filed as Exhibit 3.14 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.15						Limited Liability Company Agreement of Cadeville Gas Storage LLC, dated May 23, 2008 (filed as Exhibit 3.15 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.16						First Amendment to the Limited Liability Company Agreement of Cadeville Gas Storage LLC, dated April 16, 2012 (filed as Exhibit 3.16 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.17						Second Amendment to the Limited Liability Company Agreement of Cadeville Gas Storage LLC, dated September 5, 2014 (filed as Exhibit 3.17 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.18						Certificate of Formation of Monroe Gas Storage Company, LLC, dated June 14, 2006 (filed as Exhibit 3.18 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).


3.19						Amended and Restated Limited Liability Company Agreement of Monroe Gas Storage Company, LLC, dated May 31, 2011 (filed as Exhibit 3.19 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.20						First Amendment to the Amended and Restated Limited Liability Company Agreement of Monroe Gas Storage Company, LLC, dated September 5, 2014 (filed as Exhibit 3.20 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.21						Certificate of Formation of Perryville Gas Storage LLC, dated May 23, 2008.(filed as Exhibit 3.21 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.22						Limited Liability Company Agreement of Perryville Gas Storage LLC, dated June 16, 2008 (filed as Exhibit 3.22 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.23						First Amendment to the Limited Liability Company Agreement of Perryville Gas Storage LLC, dated April 14, 2010 (filed as Exhibit 3.23 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.24						Second Amendment to the Limited Liability Company Agreement of Perryville Gas Storage LLC, dated September 5, 2014 (filed as Exhibit 3.24 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.25						Certificate of Formation of Cardinal Gas Storage Partners LLC, dated April 2, 2008 (filed as Exhibit 3.25 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.26						Third Amended and Restated Limited Liability Company Agreement of Cardinal Gas Storage Partners LLC (F/K/A Redbird Gas Storage LLC) dated October 27, 2014 (filed as Exhibit 3.26 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.27						Certificate of Formation of Redbird Gas Storage LLC, dated May 24, 2011 (filed as Exhibit 3.27 to the Partnership's Annual Report on Form 10-K (SEC File No. 000-50056), filed March 2, 2015, and incorporation herein by reference).
3.28						Second Amended and Restated LLC Agreement of Redbird Gas Storage LLC, dated as of October 2, 2012. (filed as Exhibit 10.6 to the Partnership's Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed November 5, 2012, and incorporated herein by reference).
3.29						Certificate of Merger of Cardinal Gas Storage Partners LLC with and into Redbird Gas Storage LLC, dated October 27, 2014 (filed as Exhibit 3.27 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
10.1						Restructuring Support Agreement, dated as of June 25, 2020, among Martin Midstream Partners L.P., Martin Midstream GP LLC, Martin Midstream Finance Corp., Martin Operating GP LLC, Martin Operating Partnership L.P., Martin Transport, Inc., Redbird Gas Storage LLC, Talen’s Marine & Fuel, LLC, and certain consenting noteholders of the Partnership’s 7.25% senior unsecured notes due 2021 (filed as Exhibit 10.1 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed June 26, 2020, and incorporated herein by reference).
10.2						Eleventh Amendment to Third Amended and Restated Credit Agreement, executed as of July 8, 2020, by and among Martin Operating Partnership L.P., a Delaware limited partnership, as borrower, Martin Midstream Partners L.P., a Delaware limited partnership, the other Loan Parties party thereto, the Lenders party thereto, and Royal Bank of Canada, as administrative agent and collateral agent for the Lenders and as an L/C Issuer and a Lender (filed as Exhibit 10.1 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed July 9, 2020, and incorporated herein by reference).
10.3**						Backstop Agreement, dated as of July 9, 2020, among Martin Midstream Partners L.P., Martin Midstream Finance Corp., the other Credit Parties party thereto, and the backstop parties party thereto (filed as Exhibit 10.2 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed July 9, 2020, and incorporated herein by reference).
31.1*						Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*						Certification of Chief Executive Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551, this Exhibit is furnished to the SEC and shall not be deemed to be "filed."
32.2*						Certification of Chief Financial Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551, this Exhibit is furnished to the SEC and shall not be deemed to be "filed."


101						Inline Interactive Data: the following financial information from Martin Midstream Partners L.P.’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2020, formatted in Extensible Business Reporting Language: (1) the Consolidated and Condensed Balance Sheets; (2) the Consolidated and Condensed Statements of Income; (3) the Consolidated and Condensed Statements of Cash Flows; (4) the Consolidated and Condensed Statements of Capital; and (5) the Notes to Consolidated and Condensed Financial Statements.
104						Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document (contained in Exhibit 101).

* Filed or furnished herewith

** Schedules omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the Securities and Exchange Commission upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

Martin Midstream Partners L.P.

By:

Martin Midstream GP LLC

Its General Partner

August 7, 2020

By:

/s/ Robert D. Bondurant

Robert D. Bondurant

Executive Vice President, Treasurer, Chief Financial Officer, and Principal Accounting Officer

Martin Midstream Partners - 10-Q quarterly report FY2020 Q2

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